FDIC and International Regulators Ask ISDA to Add Early Termination Delay to ISDA Documents

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The FDIC, the Bank of England, the German Federal Financial Supervisory Authority, and the Swiss Financial Market Supervisory Authority have jointly written to the International Swaps and Derivatives Association (“ISDA”) to ask that ISDA revise its documentation to include an early termination delay in the event of a failure of a “global systemically important financial institution.”  The regulators argue that this delay would permit a transfer or similar remedy as part of the resolution process, thereby improving stability relative to terminating the contract.

ISDA released a statement in response, stating that developing a standard provision in which counterparties agree to a short-term suspension following the commencement of an insolvency or resolution action “will continue to be a primary focus of [ISDA’s] efforts.”  However, ISDA has not yet taken any official action in this matter; no changes have been made to pre-existing ISDA documents as a result of the letter from the regulatory agencies.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.

 

Topics:  Bank of England, EU, FDIC, ISDA, SIFIs

Published In: General Business Updates, Finance & Banking Updates, International Trade Updates, Securities Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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