The Federal Deposit Insurance Corporation ("FDIC") requested comments on a proposal to subject certain systemically important bank entities to restrictions regarding the terms of their qualified financial contracts ("QFCs"). The proposal also covers state savings associations and state-chartered banks for which the FDIC is the primary federal regulator (such FDIC-supervised institutions, "FSIs").

In significant part, the proposed rules would:

  • require covered FSIs to ensure that the covered qualified financial contracts to which they are parties provide that any default rights and restrictions on the transfer of the QFCs are limited to the same extent that they would be under the Dodd-Frank Act and the Federal Deposit Insurance Act ("FDI Act");
  • prohibit a covered FSI from being party to a QFC that would allow a QFC counterparty to exercise default rights against the covered FSI based on the entry into a resolution proceeding under the FDI Act, or any other resolution proceeding of an affiliate of the covered FSI; and
  • amend the definition of "qualifying master netting agreement" in the FDIC capital and liquidity rules, and certain related terms in the FDIC capital rules.

The FDIC noted that the requirements in the proposal are "substantively identical" to those in previous proposals issued by the Board of Governors of the Federal Reserve System and the Office of the Comptroller of the Currency.

Comments on the proposal must be submitted by December 27, 2016.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.