US federal banking regulations that go into effect next year require certain major financial institutions to ensure that their qualified financial contracts (QFCs), such as swaps and repurchase agreements, are subject to temporary or permanent limitations on counterparties’ legal abilities to exercise default rights in the event that the financial institution becomes subject to a
On 28 November 2016 the European Commission (the Commission) issued a proposal (the Proposal) for a Regulation on a framework for the recovery and resolution of central counterparties (CCPs).
According to the Commission’s factsheet issued at the same time as the Proposal, CCPs increase stability in financial markets and are critical in helping reduce risks in the wider economy. The recovery and resolution framework put forward in the Proposal will reduce the risk of a CCP failing, ensure the continuation of a failing CCP’s critical functions and provide national resolution authorities with tools for the resolution of a failing CCP. This will help maintain financial stability, reduce the risk of contagion to other parts of the financial markets and prevent the cost of any resolution being borne by taxpayers.
In October 2016, the Financial Stability Board (FSB) set out how it would assess the implementation of the key attributes of effective resolution regimes for financial institutions in the banking sector. The FSB’s methodology should help when assessing a jurisdiction’s compliance with the FSB’s “Key Attributes”, promote consistent assessment across jurisdictions, and provide guidance to jurisdictions when adopting or amending national resolution regimes to implement the Key Attributes across financial sectors. …