Federal Register: FDIC Restricts Certain QFC Cancellation Rights

The FDIC final rule restricting certain cancellation rights for qualified financial contracts ("QFCs") was published in the Federal Register.

As previously covered, the rule requires FDIC-supervised institutions and their subsidiaries ("covered FSIs") that are affiliated with U.S. or foreign global systemically important banking institutions ("GSIBs") to amend QFCs so that they cannot be cancelled immediately in the event of a bankruptcy or a resolution process involving the FSI or its affiliates. Covered QFCs include OTC derivatives, securities contracts (e.g., securities loans and forwards and margin loans), commodities forward contracts and repurchase agreements.

The final rule will become effective on January 1, 2018. Covered FSIs will be required to ensure that QFCs are in compliance with the new requirements if executed after the applicable compliance dates: