In 2017, U.S. federal banking regulators adopted regulations
requiring that certain financial institutions provide that their
qualified financial contracts (QFCs) are subject
to limitations on a counterparty's ability to exercise certain
default rights.
Beginning in 2019, the U.S. QFC Stay Rules (the
Rules) now require that certain major financial
institutions (U.S. global systemically important banking
organizations, or GSIBs) and the U.S. operations
of foreign GSIBs (together, Covered Entities)
include new language in certain of their underwriting agreements
and similar agreements.
Background
When Covered Entities become subject to a resolution regime as a
result of financial distress, such as that which may result from
capital or liquidity constraints, certain provisions in their QFCs
may grant their counterparties default rights such as the right to
terminate, liquidate, accelerate, demand payment or delivery, among
other remedies. The exercise of default
