These final regulations come into effect upon publication in the Federal Register. The final regime does not impose new requirements and will benefit FDIC supervised institutions that adhere to the ISDA protocol by allowing the continuation of the existing clearing treatment for certain financial contracts for the purposes of regulatory capital and liquidity rules. 27. Under Title II of the Dodd-Frank Act, counterparties are excluded from exercising the rights of termination, liquidation or set-off of the eligible financial contract until 5.00 p.m. .m .m the working day following the date of appointment of an insolvency practitioner. 12 U.S.C. 5390(c)(10)(B)(i)(I). If eligible financial contracts are transferred to a solvent third party before the expiry of the suspension, the counterparty will be permanently excluded from the exercise of those rights due to the appointment of the insolvency administrator, but will not be excluded from the exercise of those rights due to other default events. See 12 U.S.C. 5390(c)(10)(B)(i)(II). Two of the commentators [30] noted that in the suspensions approved by the State Insurance Act, there was no reference to suspensions in the definition of “qualifying framework compensation agreement” proposed by Start Printed Page 71353. Some states may consider amending laws that apply to the maintenance, reorganization, liquidation, and bankruptcy of insurance companies to grant the power to suspend the closure of derivative and similar financial contracts for twenty-four hours, such as stays under the FDI Act and the Dodd-Frank Act. Commentators have argued that the non-inclusion of suspensions as part of the state insurance resolution process in the definition of the “qualified principal clearing agreement” could have a negative impact on derivative and similar financial transactions between state-regulated insurance companies and their counterparties, including those overseen by the FDIC.

Since such stays may be analogous to similar stays among the other resolution authorities mentioned in the definition of the rule, commentators recommend that reference should also be made to state law. 1. The Agreement shall create a single legal obligation for all individual transactions covered by the Agreement in the event of default following a stay permitted under paragraph 2 of this Definition, including a case of receivership, insolvency, preservation, liquidation or similar proceedings of the other Party; The narrow objective of amending the definition of “qualified framework clearing” in the proposed rule and this final rule is to maintain the regulatory treatment of the capital and liquidity of certain financial contracts that are not affected by the isda framework contract and that are maintained by non-U.S. citizens. resolution authorities. In particular, those definitions are amended in the final provision so that a relevant netting agreement or collateral arrangement may provide for a limited suspension or circumvention of rights if, under its terms, the agreement is subject to or contains certain resolution regimes applicable to financial entities, including Title II of the Dodd-Frank Act, the FDI Act – or a similar foreign resolution regime; which is defined jointly by the agencies as Title II of the Dodd-Frank Act or Law 16 on FDI.  The Key Attributes pane available in www.financialstabilityboard.org/publications/r_111104cc.pdf. See in particular the main attributes 4.1 to 4.4 relating to clearing, clearing, security and separation of clients` assets and Annex I, Annex 5, as regards temporary stays in the event of early termination rights.

8.  The ISDA Protocol is an extension of the Isda 2014 Resolution Stay Protocol and covers SFTs in addition to OTC derivatives documented in isda framework agreements. Between the acceding parties, the ISDA Protocol replaces the isDA 2014 Resolution Stay Protocol (which does not cover SFTs). SFTs (which typically include repurchase agreements and securities lending transactions) are documented under non-ISDA framework agreements. The ISDA Protocol deals with financial contracts under these framework agreements in the Annex “Securities financing transactions”. This definitive arrangement allows the existing clearing treatment for those contracts to be maintained for the purposes of prudential rules on own funds and liquidity. The implementation of globally consistent national resolution regimes promotes the orderly resolution of internationally active financial companies and enhances financial stability. In addition, the development of the ISDA Protocol promotes the principles of Title II of the Dodd-Frank Act and the FDI Act (in cases where a counterparty is a U.S. company or its subsidiary) vis-à-vis counterparties that are not otherwise subject to U.S. law. (3) (i) The transaction is a “securities contract” or “reverse repurchase agreement” under sections 555 and 559 of the Bankruptcy Act (11 U.S.C. 555 or 559), a financial contract qualified under section 11(e)(8) of the Federal Deposit Insurance Act or a clearing contract between or between financial institutions under sections 401 to 407 of the Federal Deposit Insurance Corporation Improvement Act or the Federal Reserve Regulation EE (12 CFR Part 231); or Under this definitive rule, the FDIC allows an otherwise qualified clearing framework agreement to receive preferential clearing treatment under the FDIC`s capital and liquidity regulatory rules if (i) default rights under the agreement can be suspended under the agreement under a qualified non-U.S.

citizen. (ii) the agreement contains a special settlement regulation qualified by contract. Through these revisions, the final rule maintains the existing treatment of these contracts for the purposes of the regulatory rules on capital and liquidity, while taking into account the recent changes introduced by the BRRD and the ISDA Protocol. The FDIC received three comments on NPR starting in January 2015. One comment generally supported the rule proposed in the January 2015 NPR as a necessary technical change that would further the goal of creating effective resolution regimes for global financial firms. This commenter also recommended that the FDIC review policy issues related to the impact of closing clearing on mitigating short-term systemic risk and assess the extent to which regulatory rules on the capital and liquidity hedging ratio reflect the risks associated with net financial contracts. [29] This definitive arrangement will benefit FDIC-supervised institutions that comply with the ISDA Protocol by allowing the maintenance of the existing clearing treatment for these contracts for the purposes of prudential capital and liquidity rules. Without the final settlement, these FDIC-supervised institutions would not be able to enter into a master clearing agreement under which default rights can be suspended under the BRRD or that contains the ISDA protocol as a qualified primary clearing agreement in accordance with the FDIC`s current regulatory capital and liquidity requirements, and should therefore hold more equity and liquid funds. .