II

106TH CONGRESS

1ST SESSION S. 958

To amend certain banking and securities laws with respect to financial

contracts.

IN THE SENATE OF THE UNITED STATES

MAY 4, 1999

Mr. BENNETT introduced the following bill; which was read twice and referred

to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend certain banking and securities laws with respect

to financial contracts.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Financial Institutions Insolvency Improvement Act of

6 1999’’.

7 (b) TABLE OF CONTENTS.—The table of contents for

8 this Act is as follows:

Sec. 1. Short title; table of contents.

Sec. 2. Treatment of certain agreements by conservators or receivers of insured

depository institutions.

Sec. 3. Authority of the Corporation with respect to failed and failing institutions.
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Sec. 4. Amendments relating to transfers of qualified financial contracts.

Sec. 5. Amendments relating to disaffirmance or repudiation of qualified financial contracts.

Sec. 6. Clarifying amendment relating to master agreements.

Sec. 7. Federal Deposit Insurance Corporation Improvement Act of 1991.

Sec. 8. Recordkeeping requirements.

Sec. 9. Exemptions from contemporaneous execution requirement.

Sec. 10. SIPC stay.

Sec. 11. Federal Reserve collateral requirements.

Sec. 12. Effective date; application of amendments.

1 SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CON2 SERVATORS OR RECEIVERS OF INSURED DE3 POSITORY INSTITUTIONS.

4 (a) DEFINITION OF QUALIFIED FINANCIAL CON5 TRACT.—Section 11(e)(8)(D)(i) of the Federal Deposit In6 surance Act (12 U.S.C. 1821(e)(8)(D)(i)) is amended by

7 inserting ‘‘, resolution, or order’’ after ‘‘any similar agree8 ment that the Corporation determines by regulation’’.

9 (b) DEFINITION OF SECURITIES CONTRACT.—Sec10 tion 11(e)(8)(D)(ii) of the Federal Deposit Insurance Act

11 (12 U.S.C. 1821(e)(8)(D)(ii)) is amended to read as fol12 lows:

13 ‘‘(ii) SECURITIES CONTRACT.—The

14 term ‘securities contract’—

15 ‘‘(I) means a contract for the

16 purchase, sale, or loan of a security, a

17 certificate of deposit, a mortgage loan,

18 or any interest in a mortgage loan, a

19 group or index of securities, certifi20 cates of deposit, or mortgage loans or
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1 interests therein (including any inter2 est therein or based on the value

3 thereof) or any option on any of the

4 foregoing, including any option to

5 purchase or sell any such security,

6 certificate of deposit, loan, interest,

7 group or index, or option;

8 ‘‘(II) does not include any pur9 chase, sale, or repurchase obligation

10 under a participation in a commercial

11 mortgage loan unless the Corporation

12 determines by regulation, resolution,

13 or order to include any such agree14 ment within the meaning of such

15 term;

16 ‘‘(III) means any option entered

17 into on a national securities exchange

18 relating to foreign currencies;

19 ‘‘(IV) means the guarantee by or

20 to any securities clearing agency of

21 any settlement of cash, securities, cer22 tificates of deposit, mortgage loans or

23 interests therein, group or index of se24 curities, certificates of deposit, or

25 mortgage loans or interests therein
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1 (including any interest therein or

2 based on the value thereof) or option

3 on any of the foregoing, including any

4 option to purchase or sell any such se5 curity, certificate of deposit, loan, in6 terest, group or index or option;

7 ‘‘(V) means any margin loan;

8 ‘‘(VI) means any other agree9 ment or transaction that is similar to

10 any agreement or transaction referred

11 to in this clause (other than subclause

12 (II));

13 ‘‘(VII) means any combination of

14 the agreements or transactions re15 ferred to in this clause (other than

16 subclause (II));

17 ‘‘(VIII) means any option to

18 enter into any agreement or trans19 action referred to in this clause (other

20 than subclause (II));

21 ‘‘(IX) means a master agreement

22 that provides for an agreement or

23 transaction referred to in subclause

24 (I), (III), (IV), (V), (VI), (VII), or

25 (VIII), together with all supplements
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1 to any such master agreement, with2 out regard to whether the master

3 agreement provides for an agreement

4 or transaction that is not a securities

5 contract under this clause, except that

6 the master agreement shall be consid7 ered to be a securities contract under

8 this clause only with respect to each

9 agreement or transaction under the

10 master agreement that is referred to

11 in subclause (I), (III), (IV), (V), (VI),

12 (VII), or (VIII); and

13 ‘‘(X) means any security agree14 ment or arrangement or other credit

15 enhancement related to any agree16 ment or transaction referred to in this

17 clause (other than subclause (II)).’’.

18 (c) DEFINITION OF COMMODITY CONTRACT.—Sec19 tion 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act

20 (12 U.S.C. 1821(e)(8)(D)(iii)) is amended to read as fol21 lows:

22 ‘‘(iii) COMMODITY CONTRACT.—The

23 term ‘commodity contract’ means—

24 ‘‘(I) with respect to a futures

25 commission merchant, a contract for
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1 the purchase or sale of a commodity

2 for future delivery on, or subject to

3 the rules of, a contract market or

4 board of trade;

5 ‘‘(II) with respect to a foreign fu6 tures commission merchant, a foreign

7 future;

8 ‘‘(III) with respect to a leverage

9 transaction merchant, a leverage

10 transaction;

11 ‘‘(IV) with respect to a clearing

12 organization, a contract for the pur13 chase or sale of a commodity for fu14 ture delivery on, or subject to the

15 rules of, a contract market or board

16 of trade that is cleared by such clear17 ing organization, or commodity option

18 traded on, or subject to the rules of,

19 a contract market or board of trade

20 that is cleared by such clearing orga21 nization;

22 ‘‘(V) with respect to a commodity

23 options dealer, a commodity option;

24 ‘‘(VI) any other agreement or

25 transaction that is similar to any
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1 agreement or transaction referred to

2 in this clause;

3 ‘‘(VII) any combination of the

4 agreements or transactions referred to

5 in this clause;

6 ‘‘(VIII) any option to enter into

7 any agreement or transaction referred

8 to in this clause;

9 ‘‘(IX) a master agreement that

10 provides for an agreement or trans11 action referred to in subclause (I),

12 (II), (III), (IV), (V), (VI), (VII), or

13 (VIII), together with all supplements

14 to any such master agreement, with15 out regard to whether the master

16 agreement provides for an agreement

17 or transaction that is not a com18 modity contract under this clause, ex19 cept that the master agreement shall

20 be considered to be a commodity con21 tract under this clause only with re22 spect to each agreement or trans23 action under the master agreement

24 that is referred to in subclause (I),
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1 (II), (III), (IV), (V), (VI), (VII), or

2 (VIII); or

3 ‘‘(X) a security agreement or ar4 rangement or other credit enhance5 ment related to any agreement or

6 transaction referred to in this

7 clause.’’.

8 (d) DEFINITION OF FORWARD CONTRACT.—Section

9 11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12

10 U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows:

11 ‘‘(iv) FORWARD CONTRACT.—The

12 term ‘forward contract’ means—

13 ‘‘(I) a contract (other than a

14 commodity contract) for the purchase,

15 sale, or transfer of a commodity or

16 any similar good, article, service,

17 right, or interest which is presently or

18 in the future becomes the subject of

19 dealing in the forward contract trade,

20 or product or byproduct thereof, with

21 a maturity date that is more than 2

22 days after the date on which the con23 tract is entered into, including a re24 purchase agreement, reverse repur25 chase agreement, consignment, lease,
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1 swap, hedge transaction, deposit, loan,

2 option, allocated transaction,

3 unallocated transaction, or any other

4 similar agreement;

5 ‘‘(II) any combination of agree6 ments or transactions referred to in

7 subclauses (I) and (III);

8 ‘‘(III) any option to enter into

9 any agreement or transaction referred

10 to in subclause (I) or (II);

11 ‘‘(IV) a master agreement that

12 provides for an agreement or trans13 action referred to in subclauses (I),

14 (II), or (III), together with all supple15 ments to any such master agreement,

16 without regard to whether the master

17 agreement provides for an agreement

18 or transaction that is not a forward

19 contract under this clause, except that

20 the master agreement shall be consid21 ered to be a forward contract under

22 this clause only with respect to each

23 agreement or transaction under the

24 master agreement that is referred to

25 in subclause (I), (II), or (III); or
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1 ‘‘(V) a security agreement or ar2 rangement or other credit enhance3 ment related to any agreement or

4 transaction referred to in subclause

5 (I), (II), (III), or (IV).’’.

6 (e) DEFINITION OF REPURCHASE AGREEMENT AND

7 REVERSE REPURCHASE AGREEMENT.—Section

8 11(e)(8)(D)(v) of the Federal Deposit Insurance Act (12

9 U.S.C. 1821(e)(8)(D)(v)) is amended to read as follows:

10 ‘‘(v) REPURCHASE AGREEMENT; RE11 VERSE REPURCHASE AGREEMENT.—The

12 terms ‘repurchase agreement’ and ‘reverse

13 repurchase agreement’—

14 ‘‘(I) mean an agreement, includ15 ing related terms, which provides for

16 the transfer of 1 or more certificates

17 of deposit, mortgage-related securities

18 (as such term is defined in the Securi19 ties Exchange Act of 1934), mortgage

20 loans, interests in mortgage-related

21 securities or mortgage loans, eligible

22 bankers’ acceptances, qualified foreign

23 government securities or securities

24 that are direct obligations of, or that

25 are fully guaranteed by, the United
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1 States or any agency of the United

2 States against the transfer of funds

3 by the transferee of such certificates

4 of deposit, eligible bankers’ accept5 ances, securities, loans, or interests

6 with a simultaneous agreement by

7 such transferee to transfer to the

8 transferor thereof certificates of de9 posit, eligible bankers’ acceptances,

10 securities, loans, or interests as de11 scribed in this subclause, at a date

12 certain that is not later than 1 year

13 after the date of such transfers or on

14 demand, against the transfer of funds,

15 or any other similar agreement;

16 ‘‘(II) does not include any repur17 chase obligation under a participation

18 in a commercial mortgage loan unless

19 the Corporation determines by regula20 tion, resolution, or order to include

21 any such participation within the

22 meaning of such term;

23 ‘‘(III) means any combination of

24 agreements or transactions referred to

25 in subclauses (I) and (IV);
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1 ‘‘(IV) means any option to enter

2 into any agreement or transaction re3 ferred to in subclause (I) or (III);

4 ‘‘(V) means a master agreement

5 that provides for an agreement or

6 transaction referred to in subclause

7 (I), (III), or (IV), together with all

8 supplements to any such master

9 agreement, without regard to whether

10 the master agreement provides for an

11 agreement or transaction that is not a

12 repurchase agreement under this

13 clause, except that the master agree14 ment shall be considered to be a re15 purchase agreement under this sub16 clause only with respect to each agree17 ment or transaction under the master

18 agreement that is referred to in sub19 clause (I), (III), or (IV); and

20 ‘‘(VI) means a security agree21 ment or arrangement or other credit

22 enhancement related to any agree23 ment or transaction referred to in

24 subclause (I), (III), (IV), or (V).
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1 For purposes of this clause, the term

2 ‘qualified foreign government security’

3 means a security that is a direct obligation

4 of, or that is fully guaranteed by, the cen5 tral government of a member of the Orga6 nization for Economic Cooperation and

7 Development (as determined by regulation

8 or order adopted by the appropriate Fed9 eral banking authority).’’.

10 (f) DEFINITION OF SWAP AGREEMENT.—The Fed11 eral Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi))

12 is amended to read as follows:

13 ‘‘(vi) SWAP AGREEMENT.—The term

14 ‘swap agreement’—

15 ‘‘(I) means any agreement, in16 cluding the terms and conditions in17 corporated by reference in any such

18 agreement, that is—

19 ‘‘(aa) an interest rate swap,

20 option, future, or forward agree21 ment, including a rate floor, rate

22 cap, rate collar, cross-currency

23 rate swap, and basis swap;

24 ‘‘(bb) a spot, same day-to25 morrow, tomorrow-next, forward,
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1 or other foreign exchange or pre2 cious metals agreement;

3 ‘‘(cc) a currency swap, op4 tion, future, or forward agree5 ment;

6 ‘‘(dd) an equity index or eq7 uity swap, option, future, or for8 ward agreement;

9 ‘‘(ee) a debt index or debt

10 swap, option, future, or forward

11 agreement;

12 ‘‘(ff) a credit spread or cred13 it swap, option, future, or for14 ward agreement; or

15 ‘‘(gg) a commodity index or

16 commodity swap, option, future,

17 or forward agreement;

18 ‘‘(II) means any agreement or

19 transaction that is similar to any

20 other agreement or transaction re21 ferred to in this clause, that is pres22 ently, or in the future becomes, regu23 larly entered into in the swap market

24 (including terms and conditions incor25 porated by reference in such agree-
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1 ment), and that is a forward, swap,

2 future, or option on 1 or more rates,

3 currencies, commodities, equity securi4 ties or other equity instruments, debt

5 securities or other debt instruments,

6 or economic indices or measures of

7 economic risk or value;

8 ‘‘(III) means any combination of

9 agreements or transactions referred to

10 in this clause;

11 ‘‘(IV) means any option to enter

12 into any agreement or transaction re13 ferred to in this clause;

14 ‘‘(V) means a master agreement

15 that provides for an agreement or

16 transaction referred to in subclause

17 (I), (II), (III), or (IV), together with

18 all supplements to any such master

19 agreement, without regard to whether

20 the master agreement contains an

21 agreement or transaction that is not a

22 swap agreement under this clause, ex23 cept that the master agreement shall

24 be considered to be a swap agreement

25 under this clause only with respect to
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1 each agreement or transaction under

2 the master agreement that is referred

3 to in subclause (I), (II), (III), or (IV);

4 ‘‘(VI) means any security agree5 ment or arrangement or other credit

6 enhancement related to any agree7 ments or transactions referred to in

8 subparagraph (I), (II), (III), or (IV);

9 and

10 ‘‘(VII) is applicable for purposes

11 of this Act only, and shall not be con12 strued or applied so as to challenge or

13 affect the characterization, definition,

14 or treatment of any swap agreement

15 under any other statute, regulation, or

16 rule, including the Securities Act of

17 1933, the Securities Exchange Act of

18 1934, the Public Utility Holding Com19 pany Act of 1935, the Trust Inden20 ture Act of 1939, the Investment

21 Company Act of 1940, the Investment

22 Advisers Act of 1940, the Securities

23 Investor Protection Act of 1970, the

24 Commodity Exchange Act, and the

25 regulations promulgated by the Secu-
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1 rities and Exchange Commission or

2 the Commodity Futures Trading

3 Commission.’’.

4 (g) DEFINITION OF TRANSFER.—Section

5 11(e)(8)(D)(viii) of the Federal Deposit Insurance Act (12

6 U.S.C. 1821(e)(8)(D)(viii)) is amended to read as follows:

7 ‘‘(viii) TRANSFER.—The term ‘trans8 fer’ means every mode, direct or indirect,

9 absolute or conditional, voluntary or invol10 untary, of disposing of or parting with

11 property or with an interest in property,

12 including retention of title as a security in13 terest and foreclosure of the depository

14 institutions’s equity of redemption.’’.

15 (h) TREATMENT OF QUALIFIED FINANCIAL CON16 TRACTS.—Section 11(e)(8) of the Federal Deposit Insur17 ance Act (12 U.S.C. 1821(e)(8)) is amended—

18 (1) in subparagraph (A), by striking ‘‘para19 graph (10)’’ and inserting ‘‘paragraphs (9) and

20 (10)’’;

21 (2) in subparagraph (A)(i), by striking ‘‘to

22 cause the termination or liquidation’’ and inserting

23 ‘‘such person has to cause the termination, liquida24 tion, or acceleration’’;
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1 (3) by striking clause (ii) of subparagraph (A)

2 and inserting the following:

3 ‘‘(ii) any right under any security

4 agreement or arrangement or other credit

5 enhancement related to 1 or more qualified

6 financial contracts described in clause (i);

7 or’’; and

8 (4) by striking clause (ii) of subparagraph (E)

9 and inserting the following:

10 ‘‘(ii) any right under any security

11 agreement or arrangement or other credit

12 enhancement related to 1 or more qualified

13 financial contracts described in clause (i);

14 or’’.

15 (i) AVOIDANCE OF TRANSFERS.—Section

16 11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12

17 U.S.C. 1821(e)(8)(C)(i)) is amended by inserting ‘‘section

18 5242 of the Revised Statutes (12 U.S.C. 91), or any other

19 Federal or State law relating to the avoidance of pref20 erential or fraudulent transfers,’’ before ‘‘the Corpora21 tion’’.
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1 SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT

2 TO FAILED AND FAILING INSTITUTIONS.

3 (a) IN GENERAL.—Section 11(e)(8) of the Federal

4 Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is

5 amended—

6 (1) in subparagraph (E), by striking ‘‘other

7 than paragraph (12) of this subsection, subsection

8 (d)(9)’’ and inserting ‘‘other than subsections (d)(9)

9 and (e)(10)’’; and

10 (2) by adding at the end the following:

11 ‘‘(F) CLARIFICATION.—No provision of law

12 shall be construed as limiting the right or

13 power of the Corporation, or authorizing any

14 court or agency to limit or delay, in any man15 ner, the right or power of the Corporation to

16 transfer any qualified financial contract in ac17 cordance with paragraphs (9) and (10) or to

18 disaffirm or repudiate any such contract in ac19 cordance with subsection (e)(1).

20 ‘‘(G) WALKAWAY CLAUSES NOT EFFEC21 TIVE.—

22 ‘‘(i) IN GENERAL.—Notwithstanding

23 the provisions of subparagraphs (A) and

24 (E), and sections 403 and 404 of the Fed25 eral Deposit Insurance Corporation Im26 provement Act of 1991, no walkaway
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1 clause shall be enforceable in a qualified fi2 nancial contract of an insured depository

3 institution in default.

4 ‘‘(ii) WALKAWAY CLAUSE DEFINED.—

5 For purposes of this subparagraph, the

6 term ‘walkaway clause’ means a provision

7 in a qualified financial contract that, after

8 calculation of a value of a party’s position

9 or an amount due to or from 1 of the par10 ties in accordance with its terms upon ter11 mination, liquidation, or acceleration of the

12 qualified financial contract, either does not

13 create a payment obligation of a party or

14 extinguishes a payment obligation of a

15 party in whole or in part solely because of

16 such party’s status as a nondefaulting

17 party.’’.

18 (b) TECHNICAL AND CONFORMING AMENDMENT.—

19 Section 11(e)(12)(A) of the Federal Deposit Insurance

20 Act (12 U.S.C. 1821(e)(12)(A)) is amended by inserting

21 ‘‘or the exercise of rights or powers by’’ after ‘‘the ap22 pointment of’’.
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1 SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALI2 FIED FINANCIAL CONTRACTS.

3 (a) TRANSFERS OF QUALIFIED FINANCIAL CON4 TRACTS TO FINANCIAL INSTITUTIONS.—Section 11(e)(9)

5 of the Federal Deposit Insurance Act (12 U.S.C.

6 1821(e)(9)) is amended to read as follows:

7 ‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CON8 TRACTS.—

9 ‘‘(A) IN GENERAL.—In making any trans10 fer of assets or liabilities of a depository institu11 tion in default which includes any qualified fi12 nancial contract, the conservator or receiver for

13 such depository institution shall either—

14 ‘‘(i) transfer to 1 financial institution,

15 other than a financial institution for which

16 a conservator, receiver, trustee in bank17 ruptcy, or other legal custodian has been

18 appointed or which is otherwise the subject

19 of a bankruptcy or insolvency proceeding—

20 ‘‘(I) all qualified financial con21 tracts between any person or any af22 filiate of such person and the deposi23 tory institution in default;

24 ‘‘(II) all claims of such person or

25 any affiliate of such person against

26 such depository institution under any
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1 such contract (other than any claim

2 which, under the terms of any such

3 contract, is subordinated to the claims

4 of general unsecured creditors of such

5 institution);

6 ‘‘(III) all claims of such deposi7 tory institution against such person or

8 any affiliate of such person under any

9 such contract; and

10 ‘‘(IV) all property securing or

11 any other credit enhancement for any

12 contract described in subclause (I) or

13 any claim described in subclause (II)

14 or (III) under any such contract; or

15 ‘‘(ii) transfer none of the qualified fi16 nancial contracts, claims, property, or

17 other credit enhancement referred to in

18 clause (i) (with respect to such person and

19 any affiliate of such person).

20 ‘‘(B) TRANSFER TO FOREIGN BANK, FOR21 EIGN FINANCIAL INSTITUTION, OR BRANCH OR

22 AGENCY OF A FOREIGN BANK OR FINANCIAL IN23 STITUTION.—In transferring any qualified fi24 nancial contract and related claims and prop25 erty pursuant to subparagraph (A)(i), the con-
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1 servator or receiver for the depository institu2 tion shall not make such transfer to a foreign

3 bank, financial institution organized under the

4 laws of a foreign country, or a branch or agency

5 of a foreign bank or financial institution unless,

6 under the law applicable to such bank, financial

7 institution, branch, or agency, to the qualified

8 financial contract, and to any netting contract,

9 any security agreement or arrangement or other

10 credit enhancement related to 1 or more quali11 fied financial contracts the contractual rights of

12 the parties to such qualified financial contracts,

13 netting contracts, security agreements, or ar14 rangements, or other credit enhancements are

15 enforceable substantially to the same extent as

16 permitted under this section.

17 ‘‘(C) TRANSFER OF CONTRACT SUBJECT

18 TO THE RULES OF A CLEARING ORGANIZA19 TION.—If a conservator or receiver transfers

20 any qualified financial contract and related

21 claims, property, and credit enhancements pur22 suant to subparagraph (A)(i) and such contract

23 is subject to the rules of a clearing organiza24 tion, the clearing organization shall not be re-
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1 quired to accept the transferee as a member by

2 virtue of the transfer.

3 ‘‘(D) DEFINITION.—For purposes of this

4 paragraph, the term ‘financial institution’

5 means a broker or dealer, a depository institu6 tion, a futures commission merchant, or any

7 other institution that the Corporation deter8 mines, by regulation, to be a financial institu9 tion.’’.

10 (b) NOTICE TO QUALIFIED FINANCIAL CONTRACT

11 COUNTERPARTIES.—Section 11(e)(10)(A) of the Federal

12 Deposit Insurance Act (12 U.S.C. 1821(e)(10)(A)) is

13 amended by striking the flush material immediately fol14 lowing clause (ii) and inserting the following:

15 ‘‘the conservator or receiver shall notify any

16 person who is a party to any such contract of

17 such transfer by 5:00 p.m. (eastern time) on

18 the business day following the date of the ap19 pointment of the receiver in the case of a re20 ceivership, or the business day following such

21 transfer in the case of a conservatorship.’’.

22 (c) RIGHTS AGAINST RECEIVER AND TREATMENT OF

23 BRIDGE BANKS.—Section 11(e)(10) of the Federal De24 posit Insurance Act (12 U.S.C. 1821(e)(10)) is

25 amended—
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1 (1) by redesignating subparagraph (B) as sub2 paragraph (D); and

3 (2) by inserting after subparagraph (A) the fol4 lowing:

5 ‘‘(B) CERTAIN RIGHTS NOT ENFORCE6 ABLE.—

7 ‘‘(i) RECEIVERSHIP.—A person who is

8 a party to a qualified financial contract

9 with an insured depository institution may

10 not exercise any right such person has to

11 terminate, liquidate, or net such contract

12 under paragraph (8)(A) or section 403 or

13 404 of the Federal Deposit Insurance Cor14 poration Improvement Act of 1991, solely

15 by reason of or incidental to the appoint16 ment of a receiver for the depository insti17 tution (or the insolvency or financial condi18 tion of the depository institution for which

19 the receiver has been appointed)—

20 ‘‘(I) until 5:00 p.m. (eastern

21 time) on the business day following

22 the date of the appointment of the re23 ceiver; or

24 ‘‘(II) after the person has re25 ceived notice that the contract has
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1 been transferred pursuant to para2 graph (9)(A).

3 ‘‘(ii) CONSERVATORSHIP.—A person

4 who is a party to a qualified financial con5 tract with an insured depository institution

6 may not exercise any right such person has

7 to terminate, liquidate, or net such con8 tract under paragraph (8)(E) or section

9 403 or 404 of the Federal Deposit Insur10 ance Corporation Improvement Act of

11 1991, solely by reason of or incidental to

12 the appointment of a conservator for the

13 depository institution (or the insolvency or

14 financial condition of the depository insti15 tution for which the conservator has been

16 appointed).

17 ‘‘(iii) NOTICE.—For purposes of this

18 paragraph, the Corporation as receiver or

19 conservator of an insured depository insti20 tution shall be deemed to have notified a

21 person who is a party to a qualified finan22 cial contract with such depository institu23 tion if the Corporation has taken steps

24 reasonably calculated to provide notice to
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1 such person by the time specified in sub2 paragraph (A).

3 ‘‘(C) TREATMENT OF BRIDGE BANKS.—A

4 financial institution for which a conservator, re5 ceiver, trustee in bankruptcy, or other legal cus6 todian has been appointed or that is otherwise

7 the subject of a bankruptcy or insolvency pro8 ceeding for purposes of subsection (e)(9) does

9 not include—

10 ‘‘(i) a bridge bank; or

11 ‘‘(ii) a depository institution organized

12 by the Corporation, for which a conser13 vator is appointed either—

14 ‘‘(I) immediately upon the orga15 nization of the institution; or

16 ‘‘(II) at the time of a purchase

17 and assumption transaction between

18 such institution and the Corporation

19 as receiver for a depository institution

20 in default.’’.

21 SEC. 5. AMENDMENTS RELATING TO DISAFFIRMANCE OR

22 REPUDIATION OF QUALIFIED FINANCIAL

23 CONTRACTS.

24 Section 11(e) of the Federal Deposit Insurance Act

25 (12 U.S.C. 1821(e)) is amended—
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1 (1) by redesignating paragraphs (11) through

2 (15) as paragraphs (12) through (16), respectively;

3 (2) in paragraph (8)(C)(i), by striking ‘‘(11)’’

4 and inserting ‘‘(12)’’;

5 (3) in paragraph (8)(E), by striking ‘‘(12)’’ and

6 inserting ‘‘(13)’’; and

7 (4) by inserting after paragraph (10) the fol8 lowing new paragraph:

9 ‘‘(11) DISAFFIRMANCE OR REPUDIATION OF

10 QUALIFIED FINANCIAL CONTRACTS.—In exercising

11 the right to disaffirm or repudiate with respect to

12 any qualified financial contract to which an insured

13 depository institution is a party, the conservator or

14 receiver for such institution shall either—

15 ‘‘(A) disaffirm or repudiate all qualified fi16 nancial contracts between—

17 ‘‘(i) any person or any affiliate of

18 such person; and

19 ‘‘(ii) the depository institution in de20 fault; or

21 ‘‘(B) disaffirm or repudiate none of the

22 qualified financial contracts referred to in sub23 paragraph (A) (with respect to such person or

24 any affiliate of such person).’’.
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1 SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER

2 AGREEMENTS.

3 Section 11(e)(8)(D)(vii) of the Federal Deposit In4 surance Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to

5 read as follows:

6 ‘‘(vii) TREATMENT OF MASTER

7 AGREEMENT AS 1 AGREEMENT.—Any mas8 ter agreement for any contract or agree9 ment described in any preceding clause of

10 this subparagraph (or any master agree11 ment for such master agreement or agree12 ments), together with all supplements to

13 such master agreement, shall be treated as

14 a single agreement and a single qualified

15 financial contract. If a master agreement

16 contains provisions relating to agreements

17 or transactions that are not themselves

18 qualified financial contracts, the master

19 agreement shall be deemed to be a quali20 fied financial contract only with respect to

21 those transactions that are themselves

22 qualified financial contracts.’’.
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1 SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IM2 PROVEMENT ACT OF 1991.

3 (a) DEFINITIONS.—Section 402 of the Federal De4 posit Insurance Corporation Improvement Act of 1991 (12

5 U.S.C. 4402) is amended—

6 (1) in paragraph (6)—

7 (A) by redesignating subparagraphs (B)

8 through (D) as subparagraphs (C) through (E),

9 respectively;

10 (B) by inserting after subparagraph (A)

11 the following new subparagraph:

12 ‘‘(B) an uninsured national bank or an un13 insured State bank that is a member of the

14 Federal Reserve System, if the national bank or

15 State member bank is not eligible to make ap16 plication to become an insured bank under sec17 tion 5 of the Federal Deposit Insurance Act;’’;

18 and

19 (C) by striking subparagraph (C) (as re20 designated) and inserting the following:

21 ‘‘(C) a branch or agency of a foreign bank,

22 a foreign bank and any branch or agency of the

23 foreign bank, or the foreign bank that estab24 lished the branch or agency, as those terms are

25 defined in section 1(b) of the International

26 Banking Act of 1978;’’;
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1 (2) in paragraph (11), by inserting before the

2 period ‘‘and any other clearing organization with

3 which such clearing organization has a netting con4 tract’’;

5 (3) in paragraph (14)(A), by striking clause (i)

6 and inserting the following:

7 ‘‘(i) means a contract or agreement

8 between 2 or more financial institutions,

9 clearing organizations, or members that

10 provides for netting present or future pay11 ment obligations or payment entitlements

12 (including liquidation or closeout values re13 lating to such obligations or entitlements)

14 among the parties to the agreement; and’’;

15 and

16 (4) by adding at the end the following new

17 paragraph:

18 ‘‘(15) PAYMENT.—The term ‘payment’ means a

19 payment of United States dollars, another currency,

20 or a composite currency, and a noncash delivery, in21 cluding a payment or delivery to liquidate an

22 unmatured obligation.’’.

23 (b) ENFORCEABILITY OF BILATERAL NETTING CON24 TRACTS.—Section 403 of the Federal Deposit Insurance
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1 Corporation Improvement Act of 1991 (12 U.S.C. 4403)

2 is amended—

3 (1) by striking subsection (a) and inserting the

4 following:

5 ‘‘(a) GENERAL RULE.—Notwithstanding any other

6 provision of Federal or State law (other than paragraphs

7 (8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal

8 Deposit Insurance Act or any order authorized under sec9 tion 5(b)(2) of the Securities Investor Protection Act of

10 1970, the covered contractual payment obligations and the

11 covered contractual payment entitlements between any 2

12 financial institutions shall be netted in accordance with,

13 and subject to the conditions of, the terms of any applica14 ble netting contract (except as provided in section

15 561(b)(2) of title 11, United States Code).’’; and

16 (2) by adding at the end the following new sub17 section:

18 ‘‘(f) ENFORCEABILITY OF SECURITY AGREE19 MENTS.—The provisions of any security agreement or ar20 rangement or other credit enhancement related to 1 or

21 more netting contracts between any 2 financial institu22 tions shall be enforceable in accordance with their terms

23 (except as provided in section 561(b)(2) of title 11, United

24 States Code) and shall not be stayed, avoided, or otherwise

25 limited by any State or Federal law (other than para-
33

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1 graphs (8)(E), (8)(F), and (10)(B) of section 11(e) of the

2 Federal Deposit Insurance Act and section 5(b)(2) of the

3 Securities Investor Protection Act of 1970).’’.

4 (c) ENFORCEABILITY OF CLEARING ORGANIZATION

5 NETTING CONTRACTS.—Section 404 of the Federal De6 posit Insurance Corporation Improvement Act of 1991 (12

7 U.S.C. 4404) is amended—

8 (1) by striking subsection (a) and inserting the

9 following:

10 ‘‘(a) GENERAL RULE.—Notwithstanding any other

11 provision of Federal or State law (other than paragraphs

12 (8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal

13 Deposit Insurance Act or any order authorized under sec14 tion 5(b)(2) of the Securities Investor Protection Act of

15 1970) the covered contractual payment obligations and the

16 covered contractual payment entitlements of a member of

17 a clearing organization to and from all other members of

18 the clearing organization shall be netted in accordance

19 with, and subject to the conditions of, the terms of any

20 applicable netting contract (except as provided in section

21 561(b)(2) of title 11, United States Code).’’; and

22 (2) by adding at the end the following new sub23 section:

24 ‘‘(h) ENFORCEABILITY OF SECURITY AGREE25 MENTS.—The provisions of any security agreement or ar-
34

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1 rangement or other credit enhancement related to 1 or

2 more netting contracts between any 2 members of a clear3 ing organization shall be enforceable in accordance with

4 their terms (except as provided in section 561(b)(2) of

5 title 11, United States Code) and shall not be stayed,

6 avoided, or otherwise limited by any State or Federal law

7 (other than paragraphs (8)(E), (8)(F), and (10)(B) of sec8 tion 11(e) of the Federal Deposit Insurance Act and sec9 tion 5(b)(2) of the Securities Investor Protection Act of

10 1970).’’.

11 (d) ENFORCEABILITY OF CONTRACTS WITH UNIN12 SURED NATIONAL BANKS AND UNINSURED FEDERAL

13 BRANCHES AND AGENCIES.—The Federal Deposit Insur14 ance Corporation Improvement Act of 1991 (12 U.S.C.

15 4401 et seq.) is amended by adding at the end the fol16 lowing:

17 ‘‘SEC. 408. TREATMENT OF CONTRACTS WITH UNINSURED

18 NATIONAL BANKS AND UNINSURED FEDERAL

19 BRANCHES AND AGENCIES.

20 ‘‘(a) IN GENERAL.—Notwithstanding any other pro21 vision of law, paragraphs (8), (9), (10), and (11) of section

22 11(e) of the Federal Deposit Insurance Act shall apply

23 to an uninsured national bank or uninsured Federal

24 branch or Federal agency, except that for such purpose—
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1 ‘‘(1) any reference to the ‘Corporation as re2 ceiver’ or ‘the receiver or the Corporation’ shall refer

3 to the receiver of an uninsured national bank or un4 insured Federal branch or Federal agency appointed

5 by the Comptroller of the Currency;

6 ‘‘(2) any reference to the ‘Corporation’ (other

7 than in section 11(e)(8)(D) of that Act), the ‘Cor8 poration, whether acting as such or as conservator

9 or receiver’, a ‘receiver’, or a ‘conservator’ shall refer

10 to the receiver or conservator of an uninsured na11 tional bank or uninsured Federal branch or Federal

12 agency appointed by the Comptroller of the Cur13 rency; and

14 ‘‘(3) any reference to an ‘insured depository in15 stitution’ or ‘depository institution’ shall refer to an

16 uninsured national bank or an uninsured Federal

17 branch or Federal agency.

18 ‘‘(b) LIABILITY.—The liability of a receiver or conser19 vator of an uninsured national bank or uninsured Federal

20 branch or agency shall be determined in the same manner

21 and subject to the same limitations that apply to receivers

22 and conservators of insured depository institutions under

23 section 11(e) of the Federal Deposit Insurance Act.

24 ‘‘(c) REGULATORY AUTHORITY.—
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1 ‘‘(1) IN GENERAL.—The Comptroller of the

2 Currency, in consultation with the Federal Deposit

3 Insurance Corporation, may promulgate regulations

4 to implement this section.

5 ‘‘(2) SPECIFIC REQUIREMENT.—In promul6 gating regulations to implement this section, the

7 Comptroller of the Currency shall ensure that the

8 regulations generally are consistent with the regula9 tions and policies of the Federal Deposit Insurance

10 Corporation adopted pursuant to the Federal De11 posit Insurance Act.

12 ‘‘(d) DEFINITIONS.—For purposes of this section, the

13 terms ‘Federal branch’, ‘Federal agency’, and ‘foreign

14 bank’ have the same meanings as in section 1(b) of the

15 International Banking Act of 1978.’’.

16 SEC. 8. RECORDKEEPING REQUIREMENTS.

17 Section 11(e)(8) of the Federal Deposit Insurance

18 Act (12 U.S.C. 1821(e)(8)) is amended by adding at the

19 end the following new subparagraph:

20 ‘‘(H) RECORDKEEPING REQUIREMENTS.—

21 The Corporation, in consultation with the ap22 propriate Federal banking agencies, may pre23 scribe regulations requiring more detailed rec24 ordkeeping with respect to qualified financial
37

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1 contracts (including market valuations) by in2 sured depository institutions.’’.

3 SEC. 9. EXEMPTIONS FROM CONTEMPORANEOUS EXECU4 TION REQUIREMENT.

5 Section 13(e)(2) of the Federal Deposit Insurance

6 Act (12 U.S.C. 1823(e)(2)) is amended to read as follows:

7 ‘‘(2) EXEMPTIONS FROM CONTEMPORANEOUS

8 EXECUTION REQUIREMENT.—

9 ‘‘(A) IN GENERAL.—An agreement de10 scribed in subparagraph (B) shall not be

11 deemed to be invalid pursuant to paragraph

12 (1)(B) solely on the basis—

13 ‘‘(i) that the agreement was not exe14 cuted contemporaneously with the acquisi15 tion of the collateral; or

16 ‘‘(ii) of any pledge, delivery, or substi17 tution of the collateral made in accordance

18 with the agreement.

19 ‘‘(B) AGREEMENT DESCRIBED.—An agree20 ment is described in this subparagraph if it is

21 an agreement to provide for the lawful

22 collateralization of—

23 ‘‘(i) deposits of, or other credit exten24 sion by, a Federal, State, or local govern25 mental entity, or of any depositor referred
38

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1 to in section 11(a)(2), including an agree2 ment to provide collateral in lieu of a sur3 ety bond;

4 ‘‘(ii) securities deposited under section

5 345(b)(2) of title 11, United States Code;

6 ‘‘(iii) extensions of credit, including

7 an overdraft, from a Federal reserve bank

8 or Federal home loan bank; or

9 ‘‘(iv) 1 or more qualified financial

10 contracts (as defined in section

11 11(e)(8)(D)).’’.

12 SEC. 10. SIPC STAY.

13 Section 5(b)(2) of the Securities Investor Protection

14 Act of 1970 (15 U.S.C. 78eee(b)(2)) is amended by adding

15 at the end the following new subparagraph:

16 ‘‘(C) EXCEPTION FROM STAY.—

17 ‘‘(i) IN GENERAL.—Notwithstanding

18 section 362 of title 11, United States

19 Code, neither the filing of an application

20 under subsection (a)(3) of this section nor

21 any order or decree obtained by SIPC from

22 the court shall operate as a stay of any

23 contractual right of a creditor to liquidate,

24 terminate, or accelerate a securities con25 tract, commodity contract, forward con-
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1 tract, repurchase agreement, swap agree2 ment, or master netting agreement, each

3 as defined in title 11, United States Code,

4 to offset or net termination values, pay5 ment amounts, or other transfer obliga6 tions arising under or in connection with 1

7 or more of such contracts or agreements,

8 or to foreclose on any cash collateral

9 pledged by the debtor, whether or not with

10 respect to 1 or more of such contracts or

11 agreements.

12 ‘‘(ii) STAYS ON FORECLOSURE.—Not13 withstanding clause (i), an application,

14 order, or decree described therein may op15 erate as a stay of the foreclosure on securi16 ties collateral pledged by the debtor,

17 whether or not with respect to 1 or more

18 of such contracts or agreements, securities

19 sold by the debtor under a repurchase

20 agreement or securities lent under a secu21 rities lending agreement.

22 ‘‘(iii) DEFINITION.—As used in this

23 section, the term ‘contractual right’

24 includes—
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1 ‘‘(I) a right set forth in a rule or

2 bylaw of a national securities ex3 change, a national securities associa4 tion, or a securities clearing agency;

5 ‘‘(II) a right set forth in a bylaw

6 of a clearing organization or contract

7 market or in a resolution of the gov8 erning board thereof; and

9 ‘‘(III) a right, whether or not in

10 writing, arising under common law,

11 under law merchant, or by reason of

12 normal business practice.’’.

13 SEC. 11. FEDERAL RESERVE COLLATERAL REQUIREMENTS.

14 Section 16 of the Federal Reserve Act (12 U.S.C.

15 412) is amended in the second sentence of the second un16 designated paragraph, by striking ‘‘acceptances acquired

17 under section 13 of this Act’’ and inserting ‘‘acceptances

18 acquired under section 10A, 10B, 13, or 13A’’.

19 SEC. 12. EFFECTIVE DATE; APPLICATION OF AMENDMENTS.

20 (a) SEVERABILITY.—If any provision of this Act or

21 any amendment made by this Act, or the application of

22 any such provision or amendment to any person or cir23 cumstance, is held to be unconstitutional, the remaining

24 provisions of and amendments made by this Act and the
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1 application of such other provisions and amendments to

2 any person or circumstance shall not be affected thereby.

3 (b) EFFECTIVE DATE.—This Act and the amend4 ments made by this Act shall take effect on the date of

5 enactment of this Act.

6 (c) APPLICATION OF AMENDMENTS.—The amend7 ments made by this Act shall apply with respect to cases

8 commenced or appointments made under any Federal or

9 State law after the date of enactment of this Act, but shall

10 not apply with respect to cases commenced or appoint11 ments made under any Federal or State law before the

12 date of enactment of this Act.

Æ