On July 28, 2008, the FDIC published a Notice of Proposed Rulemaking in the Federal Register seeking to establish recordkeeping requirements for qualified financial contracts (“QFCs”) held by banks in “troubled” condition. The purpose of the Proposed Rule is to enable the FDIC, upon receivership, to make expeditious and well-informed decisions with respect to the management of a failed bank’s QFC portfolio.
Compliance with the Proposed Rule would be required within 30 days after a bank receives written notice from the FDIC or its primary Federal regulator that it is in “troubled condition.” The Proposed Rule defines “troubled condition” and sets forth three categories of recordkeeping requirements: (i) position level data; (ii) counterparty level data; and (iii) certain other files, including relevant contracts and documents, lists of counterparty identifiers, lists of counterparty affiliates, lists of affiliates that are counterparties to QFC transactions, related organizational charts and lists of supporting vendors. The position and counterparty level data must be maintained in electronic form. The designated “other” files may be maintained in electronic or written form but must be updated daily and available upon written request immediately at the close of the bank’s business day.
The FDIC is seeking comment on all aspects of the proposal including, among other areas, the definition of troubled condition and whether the rule should be applicable to all banks, troubled or not. While the FDIC also is seeking comment on the burden associated with the proposed recordkeeping requirements, the FDIC has indicated that it does not expect the burden to be substantial because it requires the retention of the type of information that should be maintained as part of a bank’s risk management of capital markets activities and is otherwise consistent with safe and sound banking practices. Comments are due by September 26, 2008.