On August 19, 2016, the OCC issued a notice of proposed rulemaking that would require OCC-supervised subsidiaries, branches and agencies of US and foreign global systemically important banking organizations to amend certain qualified financial contracts to prohibit the immediate termination of such contracts and the exercise of certain other default rights by counterparties if the firm enters bankruptcy or a special resolution proceeding. Covered QFCs are defined to include swaps, derivatives, repurchase, reverse repurchase and securities lending and borrowing transactions. Under the proposed rule, any covered QFC would be required to include a contractual stay-and-transfer provision analogous to the stay-and-transfer provision provided for in Title II of the Dodd-Frank Act that supports the orderly resolution of financial firms in their contracts. Moreover, the proposed rule would also limit the default rights of a counterparty in the event of the insolvency of the G-SIB or its affiliates. Comments must be submitted to the OCC by October 18, 2016.
The proposed rule is largely analogous to a proposed rule issued by the Federal Reserve Board on May 3, 2016 and provides a substantively parallel rule for OCC-regulated institutions within a G-SIB group.
The notice of proposed rulemaking is available at: https://www.federalregister.gov/articles/2016/08/19/2016-19671/mandatorycontractual-stay-requirements-for-qualified-financial-contracts.