UK Regulators Respond to Amended COVID-19 Support Packages
04/27/2020The U.K. Prudential Regulation Authority and the U.K. Financial Conduct Authority have published guidance for firms on the implications of HM Treasury's amendments to the U.K. Coronavirus Business Interruption Loan Scheme and Coronavirus Large Business Interruption Loan Scheme and the introduction of the Bounce Back Loan Scheme.
HM Treasury has announced the new BBLS which will run alongside the existing CBILS and CLBILS, providing government guarantees for loans to small businesses of between £2,000 and £50,000. The minimum threshold for CBILS loans will be increased to £50,001, and firms with existing CBILS loans of £50,000 or less will be entitled to switch their facility to the BBLS. The BBLS will launch for applications from May 4, 2020.
The PRA's statement states that the guarantees provided by the government in relation to the CBILS and CLBILS do not contain terms that would render them ineligible for recognition as unfunded credit risk protection, meaning they appear to be eligible to be treated as such. However, the PRA also notes that some CBILS guarantees exclude cover for interest and fees, and firms should adjust their exposure amounts accordingly to exclude elements not covered by the guarantee.
The FCA's statement sets out its decision that, pending the roll-out of the BBLS, firms taking out CBILS will not be expected to comply with CONC 5.2A4-34 of the FCA Handbook (on carrying out reasonable assessments of customers' creditworthiness) provided they comply with the relevant requirement of CBILS. This will remain the position following the launch of the BBLS for lending that continues to take place under the CBILS. For individuals subject to the Senior Managers and Certification Regime, compliance with relevant requirements of the CBILS and BBLS will constitute compliance with the requirements on assessments of creditworthiness and affordability under COCON 2.1 and 2.2 of the FCA Handbook. The FCA has also made concessions on customer due diligence checks, stating that, where authorized firms have conducted appropriate CDD prior to receiving an application under the CBILS or BBLS, it need not conduct further checks, unless the firms receive any information indicating a customer poses a higher risk of involvement in financial crime.
View the PRA's statement on the regulatory treatment of the CBILS and the CLBILS.
View the FCA's statement on the CBILS and BBLS.
View HMT's Dear CEO letter on BBLS.
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