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.
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