FIA submitted a comment letter to the Federal Reserve on Aug. 5 supporting a proposed rule impacting a handful of large U.S. banks that are deemed to be systemically important at a global level. The proposed rule would put in place a 48-hour stay in the course of a resolution, preventing counterparties from terminating uncleared derivatives, repos, reverse repos and securities borrowing transactions. This delay is intended to give regulators time to manage the failure of a major bank in an orderly fashion.
The proposal does not apply to contracts that are cleared through a clearinghouse. FIA said it supported this provision. "FIA fully supports the Board's decision to exclude cleared QFCs [qualified financial contracts] from the restrictions set out in the proposed rules. Because cleared QFCs are subject to a comprehensive regulatory regime, restrictions on the terms and conditions of such QFCs may adversely affect – rather than improve – the orderly resolution of a covered entity," FIA stated.
