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November 29, 2017

OCC adopted the final rule on mandatory contractual stay requirements for qualified financial contracts (QFCs). The final rule is intended to enhance the resilience, safety, and soundness of federally chartered and licensed financial institutions by addressing concerns related to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms. The final rule becomes effective on January 01, 2018.

Under the final rule, a covered bank is required to ensure that a covered QFC contains a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act, and limits the exercise of default rights based on the insolvency of an affiliate of the covered bank. In addition, the final rule makes conforming amendments to the Capital Adequacy Standards and the Liquidity Risk Measurement Standards in its regulations. The requirements of this final rule are substantively identical to those adopted in the final rules issued by FED and FDIC. OCC had received 21 comments on the proposed rule, representing comments from banks and other financial institutions, trade associations, and individuals. Most of the comments submitted to OCC were also submitted to FED and FDIC. As part of the effort to coordinate development of the final rules, all comments were shared among the Federal banking agencies (OCC, FED, and FDIC). 


Related Link: Final Rule (PDF)

Effective Date: January 01, 2018

Keywords: Americas, US, Securities, Banking, QFC, Covered Institutions, G-SIB, FED, FDIC, OCC

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