2016-25605: Restrictions on Qualified Financial Contracts of Certain FDIC-Supervised Institutions; Revisions to the Definition of Qualifying Master Netting Agreement and Related Definitions

Summary

The FDIC is proposing to add a new part to its rules to improve the resolvability of systemically important U.S. banking organizations and systemically important foreign banking organizations and enhance the resilience and the safety and soundness of certain state savings associations and state-chartered banks that are not members of the Federal Reserve System ("state non-member banks" or "SNMBs") for which the FDIC is the primary federal regulator (together, "FSIs" or "FDIC-supervised institutions"). Under this proposed rule, covered FSIs would be required to ensure that covered qualified financial contracts (QFCs) to which they are a party provide that any default rights and restrictions on the transfer of the QFCs are limited to the same extent as they would be under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) and the Federal Deposit Insurance Act (FDI Act). In addition, covered FSIs would generally be prohibited from being party to QFCs that would allow a QFC counterparty to exercise default rights against the covered FSI based on the entry into a resolution proceeding under the FDI Act, or any other resolution proceeding of an affiliate of the covered FSI. The proposal would also amend the definition of "qualifying master netting agreement" in the FDIC's capital and liquidity rules, and certain related terms in the FDIC's capital rules. These proposed amendments are intended to ensure that the regulatory capital and liquidity treatment of QFCs to which a covered FSI is party would not be affected by the proposed restrictions on such QFCs. The requirements of this proposed rule are substantively identical to those contained in the notice of proposed rulemaking issued by the Board of Governors of the Federal Reserve System (FRB) on May 3, 2016 (FRB NPRM) regarding "covered entities", and the notice of proposed rulemaking issued by the Office of the Comptroller of the Currency (OCC) on August 19, 2016 (OCC NPRM), regarding "covered banks".

The agency’s own summary, as published.

What this changes

Amends 3 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 12 CFR 324 Capital Adequacy of FDIC-Supervised Institutions
• 12 CFR 329 Liquidity Risk Measurement Standards
• 12 CFR 382 Restrictions on Qualified Financial Contracts