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Federal Register / Vol. 86, No. 97 / Friday, May 21, 2021 / Rules and Regulations
from receiving a PPP loan under the Small Business Administration SBA
lending restrictions original IFR.5 The exception was intended to facilitate lending by banks to a broad range of small businesses within their communities, consistent with applicable law and safe and sound banking practices. The exception applied only to PPP loans made by June 30, 2020, the original date on which the PPP was set to expire. The Board has extended the exception each time that Congress has extended the PPP.6 The Board responded to the dozen comments it received in response to the interim final rules issued in April and July in the interim final rule issued on February 17, 2021.7 Since issuing its last interim final rule, the Board received two comments, neither of which discussed the interim final rules, sections 22g and 22h, or Regulation O.
The Board is issuing this interim final rule to extend the exception to PPP
loans made through June 30, 2021.8 The exception will continue to apply if Congress and the President extend the PPP further, but will sunset on March 31, 2022.

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II. The Interim Final Rule Section 22h authorizes the Board to adopt, by regulation, exceptions to the definition of extension of credit in section 22h for transactions that pose minimal risk. 9 Therefore, the Board may except PPP loans from the restrictions in section 22h and the corresponding provisions of Regulation O upon a determination that such loans pose minimal risk.
The Board determined in the original IFR that PPP loans pose minimal risk.10
Among other things, this determination relieved member banks from ensuring that PPP loans made to certain insiders complied with the qualitative, quantitative, and procedural requirements set forth in section 22h 5 Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, 85 FR
22345 Apr. 22, 2020.
6 Loans to Executive Officers, Directors, and Principal Shareholders of Member Banks, 85 FR
43119 July 16, 2020; Loans to Executive Officers, Directors, and Principal Shareholders of Member Bank, 86 FR 9837 Feb. 17, 2021.
7 Id. at 9839.
8 References in this IFR to PPP loans include PPP second draw loans, which are PPP loans that that can be made to borrowers who already have received a first PPP loan. PPP second draw loans have the same features as PPP loans, except that fewer borrower are eligible for PPP second draw loans. For example, only borrowers with 300 or fewer employees may obtain a PPP second draw loan. See Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act, H.R. 133, 116th Cong. section 311 2020.
9 12 U.S.C. 375b9Dii.
10 85 FR 22345, 22346.

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and Regulation O. The PPP Extension Act did not change any of the features of PPP loans on which the Board relied in the original IFR to determine that PPP
loans pose minimal risk. Accordingly, for the same reasons cited in the original IFR, the Board has determined that PPP
loans appear to pose minimal risk to bank safety and soundness.11
The exception will continue to apply if Congress and the President further extend the PPP, provided that the material terms of the PPP on which the Board has justified the exception remain the same. Specifically, the exception will continue to apply to PPP loans made under an extended program as long as the SBA continues to fully guarantee the loans and the material terms of the loan, including the interest rate and term, are set by the SBA. The exception will not apply for any loans made after March 31, 2022. The duration of the sunset provision is consistent with other exceptions the Board has made in response to the COVID event.12
SBA lending restrictions continue to apply to PPP loans that are subject to section 22h and the corresponding provisions of Regulation O.13 Excepting loans that would be prohibited by the SBA lending restrictions from the requirements of section 22h and the corresponding provisions in Regulation O would not achieve any meaningful regulatory purpose. Excepting these loans from one regime and not the other also may create confusion because some lenders may mistakenly interpret an exception under one regime to extend to both regimes. Accordingly, the exception continues to apply only for insiders that would not be prohibited from receiving a PPP loan by the SBA
lending restrictions.
This interim final rule does not except a PPP loan from other restrictions that may apply to the loan, including section 22g of the Federal Reserve Act or section 215.5 of Regulation O.14 This determination also does not affect application of SBA lending restrictions to a PPP loan. The SBA has stated that favoritism by a PPP lender in processing time or prioritization of a directors or equity holders PPP
application is prohibited. 15 The Board 11 85 FR 22345, 22346 Apr. 22, 2020; 85 FR
43119, 4311920 July 16, 2020; 86 FR 9837, 9838
Feb. 17, 2021.
12 E.g., Temporary Exclusions of U.S. Treasury Securities and Deposits at Federal Reserve Banks From the Supplementary Leverage Ratio, 85 FR
20578 Apr. 14, 2020.
13 Business Loan Program Temporary Changes;
Paycheck Protection Program as Amended by the Economic Aid Act, 86 FR 3712 Jan. 6, 2021.
14 12 U.S.C. 375a; 12 CFR 215.5.
15 86 FR 3712, 3696.

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will administer the interim final rule accordingly.
Question 1: Please describe any additional terms or conditions that should apply to the exception.
Question 2: What are the advantages and disadvantages for the exception to automatically extend if the PPP is again extended?
III. Administrative Law Matters A. Administrative Procedure Act The Board is issuing the interim final rule without prior notice and the opportunity for public comment and the delayed effective date ordinarily prescribed by the Administrative Procedure Act APA.16 Pursuant to section 553bB of the APA, general notice and the opportunity for public comment are not required with respect to a rulemaking when an agency for good cause finds and incorporates the finding and a brief statement of reasons therefor in the rules issued that notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest. 17
The Board believes that the public interest is best served by implementing the interim final rule immediately in light of the short timeframe for execution of the renewed PPP mandated by the PPP Extension Act. Accordingly, the Board finds that there is good cause consistent with the public interest to issue the rule without advance notice and comment.18
The APA also requires a 30-day delayed effective date, except for 1
substantive rules which grant or recognize an exemption or relieve a restriction; 2 interpretative rules and statements of policy; or 3 as otherwise provided by the agency for good cause.19 Because the rules relieve a restriction by providing an exception to the definition of extension of credit in section 22h and Regulation O, the interim final rule is exempt from the APAs delayed effective date requirement.20
While the Board believes that there is good cause to issue the rule without advance notice and comment and with an immediate effective date, the Board is interested in the views of the public and requests comment on all aspects of the interim final rule.
B. Paperwork Reduction Act The Paperwork Reduction Act 44
U.S.C. 35013521 PRA states that no 16 5

U.S.C. 553.
U.S.C. 553bB.
18 5 U.S.C. 553bB; 553d3.
19 5 U.S.C. 553d.
20 5 U.S.C. 553d1.
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