FDIC Adopts Final Rule on Qualified Financial Contracts — 2017-09-27

The Federal Deposit Insurance Corporation (FDIC) today adopted a final rule to enhance the resilience and safety and soundness of state savings associations and banks supervised by the FDIC that are affiliated with systemically important U.S. and foreign banking organizations (“covered FDIC-supervised institutions”). Under the final rule, covered FDIC-supervised institutions are required to ensure that their qualified financial contracts (QFCs) do not allow for immediate cancellation or termination under certain circumstances. QFCs include derivatives, securities lending, and short-term funding transactions, such as repurchase agreements. These transactions can pose a threat to financial stability in times of market stress. The final rule requires that QFCs of covered FDIC-supervised institutions, including those with foreign counterparties, clarify that they are subject to temporary stays under U.S. resolution regimes.