Soon to be followed by the OCC and FDIC, the FRB has finalized requirements that many qualified financial contracts (QFCs) entered into by GSIBs contain contractual provisions ensuring application of the automatic stays required under U.S. resolution protocols.  The rule is designed to create legal certainty for a large segment of the global financial market’s U.S. activities by limiting the contagion and liquidity risk that occurred during the 2008 crisis as QFC counterparties terminated derivatives contracts.  Parties bound to these contractual terms will be forced to adhere to U.S. resolution actions for parent companies or insured depositories, giving the FDIC more time to sort out the capital-markets affairs of a complex GSIB to ensure orderly resolution, not a “rush to the exit.”

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