(a) Protocol compliance.
(1) Unless the Board determines otherwise
based on the specific facts and circumstances, a covered QFC is deemed
to comply with this subpart if it is amended by the universal protocol
or the U.S. protocol.
(2) A covered QFC will be deemed to be amended by the universal protocol
for purposes of paragraph (a)(1) of this section notwithstanding the
covered QFC being amended by one or more Country Annexes, as the term
is defined in the universal protocol.
(3) For purposes of paragraphs (a)(1) and
(2) of this section:
(i) The universal protocol means the
ISDA 2015 Universal Resolution Stay Protocol, including the Securities
Financing Transaction Annex and Other Agreements Annex, published
by the International Swaps and Derivatives Association, Inc., as of
May 3, 2016, and minor or technical amendments thereto;
(ii) The U.S. protocol
means a protocol that is the same as the universal protocol other
than as provided in paragraphs (a)(3)(ii)(A)-(F) of this section.
(A) The provisions of section 1 of the attachment to the universal
protocol may be limited in their application to covered entities and
excluded banks and may be limited with respect to resolutions under
the Identified Regimes, as those regimes are identified by the universal
protocol;
(B) The provisions
of section 2 of the attachment to the universal protocol may be limited
in their application to covered entities and excluded banks;
(C) The provisions of section
4(b)(i)(A) of the attachment to the universal protocol must not apply
with respect to U.S. special resolution regimes;
(D) The provisions of section 4(b) of the
attachment to the universal protocol may only be effective to the
extent that the covered QFCs affected by an adherent’s
election thereunder would continue to meet the requirements of this
subpart;
(E) The provisions
of section 2(k) of the attachment to the universal protocol must not
apply; and
(F) The U.S.
protocol may include minor and technical differences from the universal
protocol and differences necessary to conform the U.S. protocol to
the differences described in paragraphs (a)(3)(ii)(A)-(E) of this
section;
(iii) Amended by the universal protocol or the U.S. protocol, with
respect to covered QFCs between adherents to the protocol, includes
amendments through incorporation of the terms of the protocol (by
reference or otherwise) into the covered QFC; and
(iv) The attachment to the universal
protocol means the attachment that the universal protocol identifies
as “ATTACHMENT to the ISDA 2015 UNIVERSAL RESOLUTION STAY PROTOCOL.”
(b) Proposal of enhanced creditor protection conditions.
(1) A covered entity may request that the
Board approve as compliant with the requirements of sections 252.83
and 252.84 proposed provisions of one or more forms of covered QFCs,
or proposed amendments to one or more forms of covered QFCs, with
enhanced creditor protection conditions.
(2) Enhanced creditor protection conditions
means a set of limited exemptions to the requirements of section 252.84(b)
that is different than that of paragraphs (d), (f), and (h) of section
252.84.
(3) A covered
entity making a request under paragraph (b)(1) of this section must
provide:
(i) An analysis of the proposal that
addresses each consideration in paragraph (d) of this section;
(ii) A written legal
opinion verifying that proposed provisions or amendments would be
valid and enforceable under applicable law of the relevant jurisdictions,
including, in the case of proposed amendments, the validity and enforceability
of the proposal to amend the covered QFCs; and
(iii) Any other relevant information
that the Board requests.
(c) Board approval. The Board may
approve, subject to any conditions or commitments the Board may set,
a proposal by a covered entity under paragraph (b) of this section
if the proposal, as compared to a covered QFC that contains only the
limited exemptions in paragraphs of (d), (f), and (h) of section 252.84
or that is amended as provided under paragraph (a) of this section,
would prevent or mitigate risks to the financial stability of the
United States that could arise from the failure of a global systemically
important BHC, a global systemically important foreign banking organization,
or the subsidiaries of either and would protect the safety and soundness
of bank holding companies and state member banks to at least the same
extent.
(d) Considerations. In reviewing a proposal under this section, the Board may consider
all facts and circumstances related to the proposal, including:
(1) Whether, and the extent to which, the
proposal would reduce the resiliency of such covered entities during
distress or increase the impact on U.S. financial stability were one
or more of the covered entities to fail;
(2) Whether, and the extent to which, the
proposal would materially decrease the ability of a covered entity,
or an affiliate of a covered entity, to be resolved in a rapid and
orderly manner in the event of the financial distress or failure of
the entity that is required to submit a resolution plan;
(3) Whether, and the extent
to which, the set of conditions or the mechanism in which they are
applied facilitates, on an industry-wide basis, contractual modifications
to remove impediments to resolution and increase market certainty,
transparency, and equitable treatment with respect to the default
rights of non-defaulting parties to a covered QFC;
(4) Whether,
and the extent to which, the proposal applies to existing and future
transactions;
(5) Whether,
and the extent to which, the proposal would apply to multiple forms
of QFCs or multiple covered entities;
(6) Whether the proposal would permit a
party to a covered QFC that is within the scope of the proposal to
adhere to the proposal with respect to only one or a subset of covered
entities;
(7) With
respect to a supported party, the degree of assurance the proposal
provides to the supported party that the material payment and delivery
obligations of the covered affiliate credit enhancement and the covered
direct QFC it supports will continue to be performed after the covered
affiliate support provider enters a receivership, insolvency, liquidation,
resolution, or similar proceeding;
(8) The presence, nature, and extent of
any provisions that require a covered affiliate support provider or
transferee to meet conditions other than material payment or delivery
obligations to its creditors;
(9) The extent to which the supported party’s
overall credit risk to the direct party may increase if the enhanced
creditor protection conditions are not met and the likelihood that
the supported party’s credit risk to the direct party would decrease
or remain the same if the enhanced creditor protection conditions
are met; and
(10) Whether
the proposal provides the counterparty with additional default rights
or other rights.
