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Fed, regulators take step to encourage more Main Street loans

Kitco News

(Reuters) - The Federal Reserve on Friday offered updated guidance to banks on its Main Street Lending Program, telling them that U.S. regulators will not criticize lenders who make loans that meet the program’s requirements.

The new guidance appears to be an attempt to address crossed signals from bank regulators that have been contributing to a limited uptake of the program, which is designed to offer credit to small and mid-sized businesses that need capital to survive the downturn caused by the coronavirus pandemic.

The U.S. central bank emphasized the new guidance was developed with the Federal Deposit Insurance Corp and the Office of the Comptroller of the Currency, two of the primary U.S. bank regulators.

The new guidance states: “Supervisors will not criticize Eligible Lenders for originating Main Street loans in accordance with the Program’s requirements, including cases when such loans are considered non-pass at the time of origination, provided these weaknesses stem from the pandemic and are expected to be temporary or if such loans are part of a bank’s prudent risk mitigation strategy for an existing borrower.”

Reporting by Dan Burns; Editing by Paul Simao

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