The FDIC issued FAQs on the impact of LIBOR transitions on regulatory capital instruments under 12 CFR Part 324 ("Capital Adequacy of FDIC-Supervised Institutions"). The FDIC noted that the Federal Reserve Board and the OCC will issue similar FAQs.
In its guidance, the FDIC stated that where the terms of a capital instrument have been modified solely to replace a LIBOR reference rate, the FDIC will not consider the modified instrument to be (i) the issuance of a new instrument, or (ii) creating an incentive to redeem the instrument.
The FDIC also stated that an FDIC-supervised institution that amends the terms of a capital instrument to replace LIBOR reference rates should provide "an appropriate analysis" demonstrating that the economics of the instrument as amended are "not substantially different." When determining whether an amended capital instrument is "substantially" economically different from the original instrument, institutions should consider whether the modified version has changed terms beyond those needed to implement the new reference rate.
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