Authored by Andrew Cross
The Federal Deposit Insurance Corporation (FDIC) today issued an “FAQ” to financial institutions entitled, Frequently Asked Questions for Financial Institutions Affected by the Coronavirus Disease 2019 (Referred to as COVID-19).
The FDIC has highlighted the following items in respect of this FAQ:
- The FDIC encourages financial institutions to work with customers affected by COVID-19 in a prudent manner, especially borrowers from industry sectors particularly vulnerable to the volatility in the current economic environment and small businesses and independent contractors that are reliant on affected industries.
- A financial institution’s prudent efforts to modify the terms on existing loans for affected customers will not be subject to examiner criticism.
As financial institutions work through COVID-19 issues, we remind clients, colleagues and contacts that a variable rate commercial loan and the related interest rate hedge are governed by two different legal contracts.
If changes are made to the loan documentation, then corresponding changes need to be made to any related interest rate hedge documentation.
Also, financial institutions should consult with their accounting, finance and legal professionals to make sure that any additional regulatory, contractual, and related matters are taken into consideration.
The FDIC’s FAQ to financial institutions, along with a parallel FAQ to consumers, is available here.
Good day. Good to remember those hedges, always. DR2.