Federal Reserve Proposes Rules Restricting Default Rights in Qualified Financial Contracts with GSIBs

28 June 2016
View Client Update

Key takeaways

  • The Federal Reserve has proposed new rules that would impose restrictions on the rights of a counterparty to a qualified financial contract with a global systemically important banking organization (“GSIB”) or an affiliate of a GSIB when the GSIB or its affiliate enters into bankruptcy or resolution.
  • The proposed rules are intended  to enhance the orderly resolution of failed GSIBs by restricting rights to the same extent as would be required under the Federal Deposit Insurance Act and Title II of the Dodd-Frank Act.
  • The proposed rules are consistent with efforts by regulators in other jurisdictions to ensure that the effect of similar provisions in their own special resolution regimes would be enforced by courts in other jurisdictions, including the United States.