FDIC adopted a final rule to enhance the resilience, safety, and soundness of state savings associations and banks supervised by the FDIC that are affiliated with systemically important U.S. and foreign banking organizations (also known as covered FDIC-supervised institutions). Under the final rule, covered FDIC-supervised institutions are required to ensure that their qualified financial contracts (QFCs) do not allow for immediate cancellation or termination under certain circumstances.
The final rule requires that QFCs of covered FDIC-supervised institutions, including those with foreign counterparties, clarify that they are subject to temporary stays under U.S. resolution regimes. In addition, QFCs of covered FDIC-supervised institutions are prohibited from allowing the exercise of default rights against, or imposing transfer restrictions on, the covered FDIC-supervised institution based on the entry of an affiliate of the covered FDIC-supervised institution into bankruptcy. The final rule also amends the definitions of "qualifying master netting agreement" and related terms in the FDIC's capital and liquidity rules to account for the final rule.
FDIC issued a proposed rule on this issue last year. The final rule reflects changes made to the proposal in response to comments received by FDIC. Requirements of this final rule are substantively identical to those contained in the final rule recently adopted by FED. QFCs include derivatives, securities lending, and short-term funding transactions such as repurchase agreements. These transactions can pose a threat to financial stability in times of market stress.
Related Link: Final Rule (QFC)
Keywords: Americas, US, Securities, OTC Derivatives, QFC, Covered Institutions, FED, FDIC
Previous ArticleOSFI Released for Comment Revisions to 2018 LICAT Guideline
Next ArticleFSOC Releases Annual Report for 2017
PRA, via the consultation paper CP12/20, proposed changes to its rules, supervisory statements, and statements of policy to implement certain elements of the Capital Requirements Directive (CRD5).
EIOPA published the financial stability report that provides detailed quantitative and qualitative assessment of the key risks identified for the insurance and occupational pensions sectors in the European Economic Area.
EBA published its risk dashboard for the first quarter of 2020 together with the results of the risk assessment questionnaire.
EBA announced that the next stress testing exercise is expected to be launched at the end of January 2021 and its results are to be published at the end of July 2021.
PRA published the consultation paper CP11/20 that sets out its expectations and guidance related to auditors’ work on the matching adjustment under Solvency II.
MAS published a statement guidance on dividend distribution by banks.
APRA updated its capital management guidance for banks, particularly easing restrictions around paying dividends as institutions continue to manage the disruption caused by COVID-19 pandemic.
FSB published a report that reviews the progress on data collection for macro-prudential analysis and the availability and use of macro-prudential tools in Germany.
EBA issued a statement reminding financial institutions that the transition period between EU and UK will expire on December 31, 2020; this will end the possibility for the UK-based financial institutions to offer financial services to EU customers on a cross-border basis via passporting.
SRB published guidance on operational continuity in resolution and financial market infrastructure (FMI) contingency plans.