By Nick Timiraos 

The Federal Reserve issued new guidance to banks Friday in an effort to improve access to new business loans through its $600 billion Main Street Lending Program.

The Fed is relying on banks to underwrite loans to qualified small and midsize businesses under the novel effort to reach firms that aren't large enough to access corporate funding markets, which the central bank has also backstopped.

The Fed is trying to encourage banks to make loans that might not otherwise be made to support businesses through the coronavirus pandemic. The program has faced limited uptake since the Fed began purchasing loans in July, with some banks saying they are selling 95% of eligible loans to the Fed because of concerns over how regulators might treat loans to firms whose revenues have been significantly harmed by the pandemic.

In response, the central bank said Friday it had agreed with bank regulators at the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corporation to clarify that federal examiners will provide more flexibility in evaluating loans originated under the Main Street program.

Write to Nick Timiraos at nick.timiraos@wsj.com

 

(END) Dow Jones Newswires

September 18, 2020 13:38 ET (17:38 GMT)

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