Although they have been preparing all week, local banks that will administer the federal government’s check protection program say they are not ready yet because they still have not received information from the federal government about the functioning of the essential elements of the program.
“This is a difficult situation and there is a lot of pressure,” said David Boneno, general counsel for the Louisiana Bankers Association. “We have our deadline to start making loans, but we need the rules for how we can make these loans, and they are still not excluded.”
The LBA and individual banks desperately sought advice from federal authorities and members of the local congressional delegation to obtain as much clarity as possible.
But with the companies already lined up and less than 24 hours before the program opens, front line bank executives say they haven’t gotten the answers they need.
“With all federal programs, there are so many strange rules and we don’t know what those rules are,” said John L. Daniel, president of the Greater Baton Rouge area of Hancock Whitney. “The banking community is really worried because we are going to be blamed. It’s a difficult situation. ”
One of the biggest concerns this afternoon, according to B1Bank president Jude Melville, is how the federal government will reimburse the banks participating in the $ 350 billion program. Unlike previous emergency aid packages, which were administered by the SBA, Congress authorized local banks to administer the PPP to get money into the hands of small businesses affected by the Coronavirus more quickly.
“But they haven’t identified how the reimbursement will be done,” says Melville. “If you think about a bank’s liquidity, that’s what gives it the ability to lend, and it’s unclear how this program will impact that. Liquidity is what worries you most in a crisis. “
There are also more general concerns about the ability of banks to handle the collapse of loan applications. Although B1Bank, for example, has shifted resources to have more staff working on loan application processing, Melville says, “We haven’t arrived yet even though we have been working 24/7.” to prepare us. “
The challenge is compounded by the fact that the rules emerging from Washington continue to change. On Wednesday evening, the SBA released a new P3 request form, different from the one released earlier in the week, said Investar President and CEO John D’Angelo.
“We are all in the same boat, trying to understand what we are responsible for,” said D’Angelo. “The concern of all banks is that we want to do the right thing, support our customers, support our country, support our government, but we want to do it the right way.”
Local banks say they will start doing what they can tomorrow when the program opens and will accept applications. Yet bankers predict that treatment will likely take more than a few days, which has been promised by some in Washington.
“I think what will end up happening because of the way it is deployed, I think the banks will tend to limit it and be careful until there is more clarity,” says D ‘Angelo. “We want and need to deliver this program, but we need to make sure we understand what is expected of us and how to manage what is expected of us.”