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Fed, Other Regulators Ease Constraints for Virus-Hit Borrowers

  • Banking watchdogs urge use of short-term loan modifications
  • Such moves need not be deemed a ‘troubled debt restructuring’
The Marriner S. Eccles Federal Reserve building in Washington, D.C., U.S., on Tuesday, March 17.

The Marriner S. Eccles Federal Reserve building in Washington, D.C., U.S., on Tuesday, March 17.

Photographer: Andrew Harrer/Bloomberg

The Federal Reserve and other U.S. agencies are giving banks more leeway to ease debt burdens for borrowers hit hard by coronavirus without triggering rules that can put problem loans in a regulatory penalty box.

Banks can modify loan terms, such as reducing interest rates or giving borrowers more time to pay their debt, without necessarily having to label those situations as “troubled debt restructurings,” or TDRs, according to a Sunday statement from the Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corp. and other regulators. The agencies raised an example of lenders giving borrowers six-month long modifications that could include payment deferrals, fee waivers and repayment extensions.