Resource Center

Frequently Asked Questions Archive

This page contains some answers to a bank’s basic questions.  Additional information can be found in the comprehensive Getting Started Guide for Community Banks (click to download the PDF). 

GENERAL

ELIGIBILITY & APPLICATION

S CORPORATIONS & MUTUAL INSTITUTIONS

COMMUNITY DEVELOPMENT LOAN FUNDS

FUNDING

LENDING PLAN REVIEW

REQUIRED REPORTING

REFINANCING OF CAPITAL PURCHASE PROGRAM (CPP) AND COMMUNITY DEVELOPMENT CAPITAL INITIATIVE (CDCI) INVESTMENTS

REQUIREMENTS FOR DOWNSTREAMING CAPITAL

 


GENERAL

Which institutions do these Small Business Lending Fund web pages address?

This material applies to community banks that have total assets of less than $10 billion.

For purposes of these web pages, the terms “community bank” and “bank” encompass banks, thrifts, and bank and thrift holding companies with consolidated assets of less than $10 billion.

The information here does not apply to Subchapter S corporations, mutual institutions or community development loan funds. Information for Subchapter S corporations and mutual institutions is posted here. Information for CDLFs is posted here.

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How can the Small Business Lending Fund help my institution?

The Small Business Lending Fund aims to stimulate small business lending by reducing the dividend rate paid by a community bank on SBLF funding as the bank increases its lending.   The cost of capital provided through the Small Business Lending Fund will start no higher than 5%.  If your community bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%.  For increases in small business lending that are less than 10%, the rate can fall to between 2% and 4%.

Treasury will make SBLF funding available by purchasing senior preferred stock or equivalents in institutions that apply and are approved for participation in the Fund.  SBLF funding will be Tier 1 capital. 

Participation in the Small Business Lending Fund is entirely voluntary.  Banks may repay their SBLF funding at any time subject to regulatory approval.

Access to capital through the Small Business Lending Fund can boost your institution’s lending capacity while helping to create jobs and promote economic growth in local communities across the nation.

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When will Treasury publish terms for mutual institutions, Subchapter S corporations, and Community Development Loan Funds (CDLFs)?

Separate terms apply for Subchapter S corporations and mutual institutions. For information specific to these institutions, please refer to the Overview for Subchapter S Corporations and Mutual Institutions.

Treasury is developing terms and guidance for community development loan funds (CDLFs). Terms for CDLFs may vary from those described in the Getting Started Guide for Community Banksand Summary of Terms, and different application deadlines will apply. Treasury will publish terms and guidance for CDLFs on this website, www.treasury.gov/SBLF, when they are available. You may register to receive email updates regarding the Small Business Lending Fund by subscribing here.

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ELIGIBILITY & APPLICATION

Is my institution eligible to apply to participate in the Small Business Lending Fund?

Under the Small Business Jobs Act of 2010, certain insured depository institutions, bank holding companies, savings and loan holding companies, and community development loan funds are eligible to participate in the Small Business Lending Fund.

Your institution is eligible if it has total assets of less than $10 billion (as of the end of the fourth quarter of calendar year 2009) and it meets the other requirements for participation.  If your institution is controlled by a holding company, the combined assets of the holding company determine eligibility and your holding company must apply.  For detailed information on eligibility, please see the section titled “What Counts as ‘Qualified Small Business Lending’” in Chapter Three of the comprehensive Getting Started Guide for Community Banks (click to download the PDF).

An institution is not eligible if it is on the FDIC’s problem bank list (or similar list) or has been removed from that list in the previous 90 days. 

The Small Business Lending Fund also provides an option for community banks to refinance preferred stock issued to Treasury through the Capital Purchase Program (CPP) or the Community Development Capital Initiative (CDCI) under certain conditions.  However, simultaneous participation in CPP or CDCI and the Small Business Lending Fund is not permitted.

Separate terms apply for Subchapter S corporations and mutual institutions. For information specific to these institutions, please refer to the Overview for Subchapter S Corporations and Mutual Institutions. Credit unions are not eligible to receive funding through the Small Business Lending Fund. 

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If my institution is controlled by a bank holding company, can my institution still apply?

In the case of an insured depository institution that is controlled by a bank holding company, the bank holding company must apply and at least 90% of the funds must be immediately downstreamed.

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May a limited liability company (LLC) apply to participate under the currently published terms?

Bank holding companies that are organized as limited liability companies may participate in the Small Business Lending Fund.  The terms published on the SBLF website,  www.treasury.gov/SBLF, will generally apply.

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Does my institution have to be able to pay dividends to participate in SBLF?

Applicants must be able to pay dividends on securities issued to Treasury as a requirement of participation in SBLF. Payment of dividends on SBLF securities must not be subject to approval by any third party, including a governmental entity. This requirement includes restrictions imposed as a result of federal or state supervisory enforcement actions (such as a memorandum of understanding, cease and desist order, or board resolution) or federal or state laws or regulations.

If any such restrictions imposed by federal or state governmental entities apply to your institution, they must be removed or waived before Treasury can continue to process your institution’s application. In order for your institution to participate in SBLF, all such restrictions must have been removed or waived and a new “Inquiry Regarding Dividend Payments” form, indicating that your institution “is able to pay dividends on SBLF securities,” must be filed by August 1.

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My institution is subject to restrictions on the payment of dividends. If our regulator will consider issuing a waiver each quarter for the payment of dividends on SBLF securities, would this meet the SBLF program requirements?

No. Payment of dividends on SBLF securities must not be subject to approval by any third party, including a governmental entity. Dividend restrictions must be lifted rather than waived on a quarterly basis.

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My institution is a bank holding company that is not subject to any dividend restrictions; however, our insured depository institution subsidiary is subject to such restrictions. Must we request the removal or waiver of restrictions for our insured depository institution subsidiary?

No. Treasury requires only that the entity applying for SBLF funding not be subject to restrictions with respect to paying dividends on SBLF securities; however Treasury’s evaluation of your institution’s application includes a financial assessment of your institution’s ability to satisfy dividend payments on SBLF securities. To the extent that your institution is reliant on profits generated by its subsidiary to satisfy dividend payments on SBLF securities, the removal or waiver of any dividend restrictions that apply to the subsidiary will increase your institution’s likelihood of approval for SBLF funding.

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Certain laws and regulations automatically impose dividend restrictions on an institution that fails to meet certain financial requirements. If my institution is subject to such restrictions based on its current financial condition, does that meet the relevant SBLF program requirements?

No. If a statutory or regulatory restriction applies to an institution based on its current financial condition, the institution will need to request the removal of such a restriction.

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My institution is a de novo bank which is currently unable to pay dividends because the bank is not yet profitable. Is my institution eligible to participate?

The ability to pay dividends is a requirement of participation in the SBLF program. If an institution applies for participation in the SBLF but is subject to a dividend restriction, it must apply for and receive approval to pay dividends from the appropriate governmental entity before Treasury will complete its evaluation of the application.

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Are there any application or other fees associated with the Small Business Lending Fund?

Treasury does not charge any application fees or other fees or closing costs associated with closing a transaction with the Small Business Lending Fund.  In addition, there are no fees or penalties for repayment or pre-payment of SBLF funding.

For current CPP banks that refinance into the SBLF program, there is a 2% annual Lending Incentive Fee that will apply if the institution does not increase its small business lending. This fee will extend through the date four and one-half years following the institution’s receipt of SBLF funding.  This is discussed in further detail in the Summary of Terms for Current CPP and CDCI Participants.

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When will my institution learn whether it has been approved for SBLF funding?

Treasury is committed to the prompt and efficient review of all applications to the Fund with the goal of providing funding decisions to institutions as quickly as possible.

Working with the appropriate federal and state banking regulators, Treasury conducts a thorough analysis of each application.  Each application is evaluated independently.  Because institutions vary in their circumstances and complexity, Treasury cannot provide an indication of whether or when any specific application may be approved.  Treasury will fund institutions on a rolling basis.

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May my institution change the amount of capital requested after it has applied for funding?

In general, applicants may reduce the amount of capital requested at any time prior to the closing, but may not increase the amount of capital requested once an application has been submitted.  Applicants approved for funding with matching capital may only reduce the amount of capital requested if they raise an equivalent amount of incremental private investment (i.e., in addition to the amount of private investment initially specified in Treasury’s approval notice).

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If my institution’s application is approved, is it obligated to participate?

No.  Submitting an application to the Small Business Lending Fund does not create any obligation on the part of your institution or Treasury.

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How much time will my institution have after receiving preliminary approval from Treasury to decide whether to participate in the Small Business Lending Fund?

An institution will have 30 days after the date of Treasury’s notice of preliminary approval to decide whether it would like to participate in the Small Business Lending Fund and schedule a closing with Treasury.

For institutions that receive preliminary approval contingent on raising matching capital, Treasury will normally grant extensions if matching capital cannot be raised within the thirty (30) day period.

An institution may notify Treasury at any time prior to the closing that it has decided not to participate in the Small Business Lending Fund and withdraw its application.

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May my bank withdraw its application and resubmit a new application if a more favorable call report is available?

Institutions may only resubmit an application to correct errors on the original application, at the discretion of Treasury.  Treasury will consult with appropriate federal and state regulators before approving an application.

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If an institution applies for SBLF funding and subsequently changes its corporate structure, will Treasury allow the institution to transfer its application to the new corporate entity?

Yes. The institution’s new entity must be formed and the institution must inform Treasury of its decision to transfer the application by August 1.

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May my bank apply more than once for SBLF funding or schedule more than one closing?

Institutions may only submit a single application for the program.  Each approved institution will receive all of its SBLF funding in a single closing and funding.  Institutions whose applications have been withdrawn may not reapply.

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S CORPORATIONS & MUTUAL INSTITUTIONS

Which term sheet applies to my S corporation?

The term sheet for S corporations is available on the Overview for S Corporations and Mutual Institutions page.

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How is the term sheet for S corporations different from the term sheet for Senior Preferred Stock?

The S corporation term sheet is different because S corporations cannot issue preferred stock to Treasury without changing their tax elections.  Specifically, the term sheet for S corporations contemplates issuance of subordinated debentures instead of preferred stock.  These instruments are expected to receive Tier 2 capital treatment.

The interest rates payable reflect after-tax effective rates (assuming a 35% tax rate) equivalent to the dividend rate paid on the preferred stock.   Please see the term sheet for S corporations on the Overview for S Corporations and Mutual Institutions page for additional information.

 

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My institution applied to participate in SBLF prior to the publication of the S corporation term sheets. Should my institution reapply if it still wants to participate?

No.  Treasury has retained all applications received from S corporations before the publication of the term sheet on May 12, 2011.  Treasury will contact each of these institutions via email to verify that the institution intends to proceed with its application under the newly published terms.

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If my bank holding company receives SBLF funding under the terms for S corporations, can it downstream SBLF funding to its subsidiary bank as Tier 1 capital?

Yes, bank holding companies are required to downstream at least 90% of their SBLF funding to their insured depository subsidiaries as equity capital contributions in a manner that will cause such contributions to qualify for inclusion in the Tier 1 capital of their subsidiaries.  SBLF applicants should contact their regulators if they have additional questions regarding capital treatment.

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Which term sheet applies to my mutual institution?

The term sheet for mutual holding companies and mutual depository institutions is available on the Overview for S Corporations and Mutual Institutionspage. 

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How is the term sheet for mutual institutions different from the Senior Preferred Stock term sheet?

The mutual institution term sheet is different because mutual institutions cannot issue preferred stock to Treasury without changing their tax elections.  Specifically, the term sheet for mutual institutions contemplates issuance of subordinated debentures instead of preferred stock.  These instruments are expected to receive Tier 2 capital treatment.

The interest rates payable reflect after-tax effective rates (assuming a 35% tax rate) equivalent to the dividend rate paid on the preferred stock.   Please see the term sheet for mutual institutions on the Overview for S Corporations and Mutual Institutionspage for additional information.

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For purposes of the debt-to-equity standard under the Federal Reserve Board’s Small Bank Holding Company Policy Statement, how is subordinated debt issued to Treasury’s SBLF by S corporation or mutual small bank holding companies treated?

The Federal Reserve Board announced on June 13, 2011 the adoption of an interim final rule that allows small bank holding companies that are that are organized as subchapter S corporations or in mutual form to exclude subordinated debt issued to Treasury’s SBLF from treatment as “debt” for purposes of the debt-to-equity standard under the Federal Reserve Board's Small Bank Holding Company Policy Statement. 

Additional information regarding this announcement may be found at http://www.federalreserve.gov/newsevents/press/bcreg/20110613a.htm.

SBLF applicants should contact their regulators if they have questions regarding capital treatment.

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COMMUNITY DEVELOPMENT LOAN FUNDS

My CDLF is currently certified by the CDFI Fund. Do we still need to submit the Certification of Material Events Change form?

Yes.  All CDLF applicants that have been certified as a CDFI by the CDFI Fund prior to May 25, 2011 must submit a Certification of Material Events Change form as part of the SBLF application.

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My CDLF’s audited financial statements do not list a line item that is required on the Eligibility Worksheet for CDLFs. How should we complete this worksheet for our application?

Your CDLF should complete the tables on the Eligibility Worksheet in full prior to submitting your application.  For items referencing your financial statements, please ensure that the figures you use to complete the tables reflect those reported in your CDLF’s audited financial statements as submitted.  Treasury recognizes that, in certain cases, the description of an item on your financial statement may not match the description of the same item on the Eligibility Worksheet.  In this case, you may provide an explanation in the Additional Information section of your application.

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What can my CDLF expect at the Treasury onsite review?

Treasury will email eligible institutions with details about scheduling the onsite review and indicate the documents and personnel that should be made available.

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FUNDING

How much funding can my institution receive?

If your institution has total assets of $1 billion or less, it may apply for SBLF funding that equals up to 5% of its risk-weighted assets (as as reported in the call report immediately preceding the date of application).  If your institution has assets of more than $1 billion, but less than $10 billion, it may apply for funding that equals up to 3% of its risk-weighted assets. 

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How will Treasury determine whether my institution is required to receive a matching private investment to participate in the Fund?

Treasury will only require an institution to raise matching private investment as a condition of approval if the institution would not otherwise qualify to receive SBLF funding absent such capital.

If an institution is required to raise matching funds as a condition for receiving SBLF funding, the following will apply:

  • Treasury will notify the institution of the amount of private funds it must raise to qualify for SBLF funding at the time of preliminary approval;
  • The maximum amount of SBLF funding provided by Treasury will equal to 3% of the institution’s risk-weighted assets;
  • The source of the private investment must not be an institution that has received or applied to receive capital from the Small Business Lending Fund; and
  • The private investment must be subordinate to the SBLF capital and carry terms satisfactory to Treasury (although Treasury may approve a dividend rate for the private investment that is higher than the SBLF rate).

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Does my institution have to get shareholder or other relevant approvals to issue preferred stock or subordinated debt prior to closing the SBLF investment?

Yes. Because institutions will generally have a limited period in which to receive SBLF funding, Treasury encourages all applicants to secure the necessary approvals for the issuance of the applicable securities as soon as possible to allow sufficient time for closing. There will be no funding of transactions under SBLF after September 27, 2011.

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LENDING PLAN REVIEW

How will Treasury evaluate whether an institution’s small business lending plan satisfies the requirement to describe how the institution will address the needs of small businesses in the communities it serves?

In evaluating whether a lending plan adequately describes how an institution intends to use SBLF funding to address the needs of small businesses in the communities it serves, Treasury considers whether the plan describes:

  • the communities served by the institution and how the SBLF will meet their lending needs
  • loan demand in the communities the institution serves, including a quantitative assessment by loan or business type
  • the institution’s historical small business lending growth and experience
  • the institution’s participation in Small Business Administration, U.S. Department of Agriculture, or state small business lending programs
  • the resources that the institution dedicates to small business lending activities
  • the role of small business lending within the institution’s overall corporate strategy and business objectives
  • the institution’s current qualified small business lending as a percentage of its total loan portfolio
  • the institution’s plans to hire additional staff, engage in additional staff training, or open additional branches or introduce new products or capabilities with respect to small business lending

If an applicant’s Qualified Small Business Lending is 10% or less of its total loan portfolio, the lending plan should include a detailed description the institution’s market entry strategy for making loans eligible for inclusion in Qualified Small Business Lending.  In these cases, the institution should describe the credit products it intends to offer, its target customer base, anticipated distribution channels, and expected investments.  Please note that Qualified Small Business Lending includes only (i) commercial and industrial loans, (ii) owner-occupied nonfarm, nonresidential real estate loans, (iii) loans to finance agricultural production and other loans to farmers, and (iv) loans secured by farmland.

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In reviewing a lending plan, how will Treasury evaluate an institution’s “Projected Increase in Small Business Lending”?

Institutions must project an increase in qualified small business lending equal to or greater than the amount of SBLF funding the institution has requested.  To meet this standard, an institution may reduce the amount of SBLF funding it has requested if this amount exceeds its projected increase in small business lending or resubmit its lending plan.

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How will Treasury evaluate whether an institution’s small business lending plan satisfies the requirement to describe how the institution provides for community outreach?

In evaluating whether a lending plan adequately describes an institution’s plan to provide for community outreach, Treasury considers whether the plan describes:

  • the institution’s use of general media outlets including print, radio, television, and internet, including existing or anticipated relationships with identified media outlets in the served communities
  • the institution’s use of media outlets that target organizations, trade associations, and individuals that represent, work with, or are women, minorities, or veterans, including existing or anticipated relationships with identified media outlets
  • the institution’s membership and participation in community organizations and/or trade associations
  • the availability of production of bi- or multilingual outreach materials
  • previous or planned outreach activities conducted by bi- or multilingual staff on behalf of the institution

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REQUIRED REPORTING

What kind of reporting is required?

If your institution participates in the Small Business Lending Fund, it will be required to submit the reports and certifications listed in the following chart:

For assistance on how to fill out the reports, please refer to Chapter Three of the comprehensive Getting Started Guide for Community Banks.

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REFINANCING OF CAPITAL PURCHASE PROGRAM (CPP) AND COMMUNITY DEVELOPMENT CAPITAL INITIATIVE (CDCI) INVESTMENTS

Can my institution refinance outstanding CPP or CDCI securities through the Small Business Lending Fund?

If your institution is a participant in CPP or CDCI, it may apply to refinance its outstanding CPP and CDCI securities through the Small Business Lending Fund.

If your institution applies for refinancing, its application will be evaluated by Treasury under the same process used for other applicants.  (Read more about refinancing requirements and how applications are evaluated in Chapter Two of the comprehensive Getting Started Guide for Community Banks.)  Warrants issued in connection with CPP investments will remain outstanding.

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What are the eligibility requirements for the Small Business Lending Fund for an institution that has received funding under CPP or CDCI?

To be eligible for refinancing, your institution must be in material compliance with all the terms, conditions, and covenants of its CPP or CDCI agreement, be current on its dividend payments to Treasury, and not previously have missed more than one dividend payment (although a payment submitted 60 or fewer days after the due date will not be considered a missed payment for this purpose).  In addition, all outstanding CPP and CDCI securities must be refinanced or repaid in full at the time of the refinancing.  Please consult the Summary of Terms for Current CPP and CDCI Participantsfor further detail.

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If an institution missed a CPP or CDCI dividend payment because its regulator would not permit the payment, is it still considered a missed payment for purposes of determining eligibility to apply to refinance into the SBLF?

Yes. To be eligible for SBLF funding, an applicant must not have missed more than one CPP or CDCI dividend payment, regardless of the reason. CPP or CDCI dividends paid more than 60 days after the dividend payment date are missed payments for the purpose meeting this requirement. This requirement applies irrespective of the cause of a missed CPP or CDCI dividend payment.

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Which securities must be redeemed for the institution to be considered fully exited from CPP or CDCI in order to be eligible to receive funding under the Small Business Lending Fund? 

Institutions should refer to the Summary of Terms for Current CPP and CDCI Participants.  Institutions participating in the Small Business Lending Fund must redeem any outstanding CPP or CDCI preferred stock on or prior to the date of Treasury’s investment, which includes any “warrant preferred" shares outstanding and dividends due.  If at the time of the closing the sum of the aggregate liquidation preference of the CPP or CDCI stock exceeds the amount of SBLF funding your institution may receive, it must redeem the additional CPP or CDCI stock in immediately available funds on or before the date it receives SBLF funding.  Please contact your CPP or CDCI representative at Treasury for questions regarding the amount of CPP or CDCI stock and dividends your institution may have outstanding.

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REQUIREMENTS FOR DOWNSTREAMING FUNDING

If there is more than one insured depository institution, what are the requirements regarding downstreaming?

If the holding company owns more than one insured depository institution, no insured depository institution may receive more than 5% of its risk-weighted assets, if the holding company has total assets of $1 billion or less, or 3% of its risk-weighted assets, if the holding company has total assets of more than $1 billion and less than $10 billion.

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Does the downstreaming requirement apply to CPP or CDCI funding that has already been invested, or only to new funding my bank may receive?

For institutions that refinance capital investments from CPP or CDCI through SBLF, the requirement to downstream not less than 90% of Treasury’s investment will only apply to incremental capital received from SBLF, not capital that is refinanced from CPP or CDCI.

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How soon following receipt of SBLF funding must an institution downstream funds to its insured depository institution subsidiaries?

Funds must be downstreamed to insured depository subsidiaries immediately following receipt of the SBLF funding.

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Must the SBLF funding subject to the downstreaming requirement be issued to a holding company’s insured depository subsidiaries in exchange for a specific form of capital?

SBLF funding that is subject to the downstreaming requirement must be contributed to a holding company’s insured depository subsidiaries in exchange for equity that qualifies for inclusion in the subsidiaries’ Tier 1 capital.

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Last Updated: 3/22/2012 2:59 PM