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Final Rule Issued on Mandatory Contractual Stay Requirements
On Wednesday, November 29, 2017, the OCC issued its final rule to address concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of systemically important financial firms. The final rule requires a covered bank to ensure all covered qualified financial contracts (QFC) meet the following criteria:
- Contain a contractual stay-and-transfer provision analogous to the statutory stay-and-transfer provision imposed under title II Dodd–Frank and in the Federal Deposit Insurance Act;
- Limit the exercise of default rights based on the insolvency of an affiliate of the covered bank.
The final rule also makes conforming amendments to the OCC’s capital adequacy standards in 12 CFR 3 and the liquidity risk measurement standards in 12 CFR 50. The OCC worked closely with the Board of Governors of the Federal Reserve System and the FDIC to ensure final rule requirements were substantively identical to those contained in final rules issued by the Board on September 12, 2017, and the FDIC on October 30, 2017.