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Mandatory Contractual Stay Requirements for Qualified Financial Contracts

October 04, 2016 / Source: OCC

Subject: Mandatory Contractual Stay Requirements for Qualified Financial Contracts
Date: October 3, 2016

To: Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies; Department and Division Heads; All Examining Personnel; and Other Interested Parties

Description: Notice of Proposed Rulemaking

Summary

The Office of the Comptroller of the Currency (OCC) is seeking comment on a proposed rule that would enhance the resilience and the safety and soundness of federally chartered and licensed financial institutions.  The proposed rule would address concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms. Under this proposed rule, a covered bank would be required to ensure that all covered qualified financial contracts (QFC) (1) contain a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under title II of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd–Frank Act) and in the Federal Deposit Insurance Act, and (2) limit the exercise of default rights based on the insolvency of an affiliate of the covered bank. In addition, this proposed rule would make conforming amendments to the OCC’s capital adequacy standards in 12 CFR 3 and the liquidity risk measurement standards in 12 CFR 50. The OCC worked closely with the Board of Governors of the Federal Reserve System (Board) to ensure that the requirements of this proposed rule are substantively identical to those contained in a notice of proposed rulemaking issued by the Board on May 3, 2016. The OCC’s notice of proposed rulemaking was published in the Federal Register on August 19, 2016, and comments are due on October 18, 2016.

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