Limiting too-big-to-fail for qualified financial contracts

Author: | Published: 30 Oct 2017

The US Federal Reserve has aligned its latest rules for a number of G-Sibs’ contractual requirements to the resolution regimes applicable to these entities

On September 12 2017, the board of governors of the Federal Reserve System published in the Federal Register final rules (the Final Rules) intended to reduce the potential risks posed to the US financial system by banks deemed too big to fail. The Final Rules will impose restrictions on certain non-cleared financial contracts entered into by US global systemically important banking organisations (G-Sibs) and their subsidiaries, as well as the US operations of foreign G-Sibs (collectively, the covered entities). Subsidiaries or operations subject to regulation by another banking regulator are not covered. These restrictions will significantly limit counterparty default rights in over-the-counter derivatives, repurchase and reverse repurchase agreements, securities lending and borrowing transactions, commodity contracts and forward agreements (collectively, qualified financial contracts or QFCs)....



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