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Union Calendar No. 492

106TH CONGRESS

2D SESSION H. R. 1161

[Report No. 106–834, Part I]

To revise the banking and bankruptcy insolvency laws with respect to the

termination and netting of financial contracts, and for other purposes.

IN THE HOUSE OF REPRESENTATIVES

MARCH 17, 1999

Mr. LEACH (for himself, Mr. LAFALCE, and Mrs. ROUKEMA) introduced the

following bill; which was referred to the Committee on Banking and Financial Services, and in addition to the Committees on the Judiciary, and

Commerce, for a period to be subsequently determined by the Speaker,

in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned

SEPTEMBER 7, 2000

Reported from the Committee on Banking and Financial Services with an

amendment

[Strike out all after the enacting clause and insert the part printed in italic]

SEPTEMBER 7, 2000

Referral to the Committees on the Judiciary and Commerce extended for a

period ending not later than September 7, 2000.

SEPTEMBER 7, 2000

The Committees on the Judiciary and Commerce discharged; committed to the

Committee of the Whole House on the State of the Union and ordered

to be printed
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[For text of introduced bill, see copy of bill as introduced on March 17, 1999]

A BILL

To revise the banking and bankruptcy insolvency laws with

respect to the termination and netting of financial contracts, and for other purposes.

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.

4 This Act may be cited as the ‘‘Financial Contract Net5 ting Improvement Act of 2000’’.

6 SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CON7 SERVATORS OR RECEIVERS OF INSURED DE8 POSITORY INSTITUTIONS.

9 (a) DEFINITION OF QUALIFIED FINANCIAL CON10 TRACT.—Section 11(e)(8)(D)(i) of the Federal Deposit In11 surance Act (12 U.S.C. 1821(e)(8)(D)(i)) is amended by in12 serting ‘‘, resolution or order’’ after ‘‘any similar agreement

13 that the Corporation determines by regulation’’.

14 (b) DEFINITION OF SECURITIES CONTRACT.—Section

15 11(e)(8)(D)(ii) of the Federal Deposit Insurance Act (12

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

17 ‘‘(ii) SECURITIES CONTRACT.—The

18 term ‘securities contract’—
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1 ‘‘(I) means a contract for the pur2 chase, sale, or loan of a security, a cer3 tificate of deposit, a mortgage loan, or

4 any interest in a mortgage loan, a

5 group or index of securities, certificates

6 of deposit, or mortgage loans or inter7 ests therein (including any interest

8 therein or based on the value thereof)

9 or any option on any of the foregoing,

10 including any option to purchase or

11 sell any such security, certificate of de12 posit, loan, interest, group or index, or

13 option;

14 ‘‘(II) does not include any pur15 chase, sale, or repurchase obligation

16 under a participation in a commercial

17 mortgage loan unless the Corporation

18 determines by regulation, resolution, or

19 order to include any such agreement

20 within the meaning of such term;

21 ‘‘(III) means any option entered

22 into on a national securities exchange

23 relating to foreign currencies;

24 ‘‘(IV) means the guarantee by or

25 to any securities clearing agency of
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1 any settlement of cash, securities, cer2 tificates of deposit, mortgage loans or

3 interests therein, group or index of se4 curities, certificates of deposit, or mort5 gage loans or interests therein (includ6 ing any interest therein or based on

7 the value thereof) or option on any of

8 the foregoing, including any option to

9 purchase or sell any such security, cer10 tificate of deposit, loan, interest, group

11 or index, or option;

12 ‘‘(V) means any margin loan;

13 ‘‘(VI) means any other agreement

14 or transaction that is similar to any

15 agreement or transaction referred to in

16 this clause;

17 ‘‘(VII) means any combination of

18 the agreements or transactions referred

19 to in this clause;

20 ‘‘(VIII) means any option to enter

21 into any agreement or transaction re22 ferred to in this clause;

23 ‘‘(IX) means a master agreement

24 that provides for an agreement or

25 transaction referred to in subclause (I),
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1 (III), (IV), (V), (VI), (VII), or (VIII),

2 together with all supplements to any

3 such master agreement, without regard

4 to whether the master agreement pro5 vides for an agreement or transaction

6 that is not a securities contract under

7 this clause, except that the master

8 agreement shall be considered to be a

9 securities contract under this clause

10 only with respect to each agreement or

11 transaction under the master agree12 ment that is referred to in subclause

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

14 (VIII); and

15 ‘‘(X) means any security agree16 ment or arrangement or other credit

17 enhancement related to any agreement

18 or transaction referred to in this

19 clause.’’.

20 (c) DEFINITION OF COMMODITY CONTRACT.—Section

21 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act (12

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

23 ‘‘(iii) COMMODITY CONTRACT.—The

24 term ‘commodity contract’ means—
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1 ‘‘(I) with respect to a futures com2 mission merchant, a contract for the

3 purchase or sale of a commodity for fu4 ture delivery on, or subject to the rules

5 of, a contract market or board of trade;

6 ‘‘(II) with respect to a foreign fu7 tures commission merchant, a foreign

8 future;

9 ‘‘(III) with respect to a leverage

10 transaction merchant, a leverage trans11 action;

12 ‘‘(IV) with respect to a clearing

13 organization, a contract for the pur14 chase or sale of a commodity for future

15 delivery on, or subject to the rules of,

16 a contract market or board of trade

17 that is cleared by such clearing organi18 zation, or commodity option traded on,

19 or subject to the rules of, a contract

20 market or board of trade that is

21 cleared by such clearing organization;

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 in

2 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), (II),

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

13 together with all supplements to any

14 such master agreement, without regard

15 to whether the master agreement pro16 vides for an agreement or transaction

17 that is not a commodity contract

18 under this clause, except that the mas19 ter agreement shall be considered to be

20 a commodity contract under this clause

21 only with respect to each agreement or

22 transaction under the master agree23 ment that is referred to in subclause

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

25 (VIII); or
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1 ‘‘(X) any security agreement or

2 arrangement or other credit enhance3 ment related to any agreement or

4 transaction referred to in this clause.’’.

5 (d) DEFINITION OF FORWARD CONTRACT.—Section

6 11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12

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

8 ‘‘(iv) FORWARD CONTRACT.—The term

9 ‘forward contract’ means—

10 ‘‘(I) a contract (other than a com11 modity contract) for the purchase, sale,

12 or transfer of a commodity or any

13 similar good, article, service, right, or

14 interest which is presently or in the fu15 ture becomes the subject of dealing in

16 the forward contract trade, or product

17 or byproduct thereof, with a maturity

18 date more than 2 days after the date

19 the contract is entered into, including

20 a repurchase transaction, reverse re21 purchase transaction, consignment,

22 lease, swap, hedge transaction, deposit,

23 loan, option, allocated transaction,

24 unallocated transaction, or any other

25 similar agreement;
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1 ‘‘(II) any combination of agree2 ments or transactions referred to in

3 subclauses (I) and (III);

4 ‘‘(III) any option to enter into

5 any agreement or transaction referred

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

7 ‘‘(IV) a master agreement that

8 provides for an agreement or trans9 action referred to in subclause (I), (II),

10 or (III), together with all supplements

11 to any such master agreement, without

12 regard to whether the master agreement

13 provides for an agreement or trans14 action that is not a forward contract

15 under this clause, except that the mas16 ter agreement shall be considered to be

17 a forward contract under this clause

18 only with respect to each agreement or

19 transaction under the master agree20 ment that is referred to in subclause

21 (I), (II), or (III); or

22 ‘‘(V) any security agreement or

23 arrangement or other credit enhance24 ment related to any agreement or
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1 transaction referred to in subclause (I),

2 (II), (III), or (IV).’’.

3 (e) DEFINITION OF REPURCHASE AGREEMENT.—Sec4 tion 11(e)(8)(D)(v) of the Federal Deposit Insurance Act

5 (12 U.S.C. 1821(e)(8)(D)(v)) is amended to read as follows:

6 ‘‘(v) REPURCHASE AGREEMENT.—The

7 term ‘repurchase agreement’ (which defini8 tion also applies to the term ‘reverse repur9 chase agreement’)—

10 ‘‘(I) means an agreement, includ11 ing related terms, which provides for

12 the transfer of 1 or more certificates of

13 deposit, mortgage-related securities (as

14 such term is defined in the Securities

15 Exchange Act of 1934), mortgage loans,

16 interests in mortgage-related securities

17 or mortgage loans, eligible bankers’ ac18 ceptances, qualified foreign government

19 securities or securities that are direct

20 obligations of, or that are fully guaran21 teed by, the United States or any agen22 cy of the United States against the

23 transfer of funds by the transferee of

24 such certificates of deposit, eligible

25 bankers’ acceptances, securities, loans,
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1 or interests with a simultaneous agree2 ment by such transferee to transfer to

3 the transferor thereof certificates of de4 posit, eligible bankers’ acceptances, se5 curities, loans, or interests as described

6 above, at a date certain not later than

7 1 year after such transfers or on de8 mand, against the transfer of funds, or

9 any other similar agreement;

10 ‘‘(II) does not include any repur11 chase obligation under a participation

12 in a commercial mortgage loan unless

13 the Corporation determines by regula14 tion, resolution, or order to include

15 any such participation within the

16 meaning of such term;

17 ‘‘(III) means any combination of

18 agreements or transactions referred to

19 in subclauses (I) and (IV);

20 ‘‘(IV) means any option to enter

21 into any agreement or transaction re22 ferred to in subclause (I) or (III);

23 ‘‘(V) means a master agreement

24 that provides for an agreement or

25 transaction referred to in subclause (I),
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1 (III), or (IV), together with all supple2 ments to any such master agreement,

3 without regard to whether the master

4 agreement provides for an agreement

5 or transaction that is not a repurchase

6 agreement under this clause, except

7 that the master agreement shall be con8 sidered to be a repurchase agreement

9 under this subclause only with respect

10 to each agreement or transaction under

11 the master agreement that is referred to

12 in subclause (I), (III), or (IV); and

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

15 enhancement related to any agreement

16 or transaction referred to in subclause

17 (I), (III), (IV), or (V).

18 For purposes of this clause, the term ‘quali19 fied foreign government security’ means a

20 security that is a direct obligation of, or

21 that is fully guaranteed by, the central gov22 ernment of a member of the Organization

23 for Economic Cooperation and Development

24 (as determined by regulation or order
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1 adopted by the appropriate Federal banking

2 authority).’’.

3 (f) DEFINITION OF SWAP AGREEMENT.—Section

4 11(e)(8)(D)(vi) of the Federal Deposit Insurance Act (12

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

6 ‘‘(vi) SWAP AGREEMENT.—The term

7 ‘swap agreement’ means—

8 ‘‘(I) any agreement, including the

9 terms and conditions incorporated by

10 reference in any such agreement, which

11 is an interest rate swap, option, future,

12 or forward agreement, including a rate

13 floor, rate cap, rate collar, cross-cur14 rency rate swap, and basis swap; a

15 spot, same day-tomorrow, tomorrow16 next, forward, or other foreign ex17 change or precious metals agreement; a

18 currency swap, option, future, or for19 ward agreement; an equity index or eq20 uity swap, option, future, or forward

21 agreement; a debt index or debt swap,

22 option, future, or forward agreement; a

23 credit spread or credit swap, option,

24 future, or forward agreement; a com25 modity index or commodity swap, op-
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1 tion, future, or forward agreement; or

2 a weather swap, weather derivative, or

3 a weather option;

4 ‘‘(II) any agreement or trans5 action similar to any other agreement

6 or transaction referred to in this clause

7 that is presently, or in the future be8 comes, regularly entered into in the

9 swap market (including terms and

10 conditions incorporated by reference in

11 such agreement) and that is a forward,

12 swap, future, or option on 1 or more

13 rates, currencies, commodities, equity

14 securities or other equity instruments,

15 debt securities or other debt instru16 ments, or economic indices or measures

17 of economic risk or value;

18 ‘‘(III) any combination of agree19 ments or transactions referred to in

20 this clause;

21 ‘‘(IV) any option to enter into

22 any agreement or transaction referred

23 to in this clause;

24 ‘‘(V) a master agreement that pro25 vides for an agreement or transaction
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1 referred to in subclause (I), (II), (III),

2 or (IV), together with all supplements

3 to any such master agreement, without

4 regard to whether the master agreement

5 contains an agreement or transaction

6 that is not a swap agreement under

7 this clause, except that the master

8 agreement shall be considered to be a

9 swap agreement under this clause only

10 with respect to each agreement or

11 transaction under the master agree12 ment that is referred to in subclause

13 (I), (II), (III), or (IV); and

14 ‘‘(VI) any security agreement or

15 arrangement or other credit enhance16 ment related to any agreements or

17 transactions referred to in subpara18 graph (I), (II), (III), (IV), or (V).

19 Such term is applicable for purposes of this

20 title only and shall not be construed or ap21 plied so as to challenge or affect the charac22 terization, definition, or treatment of any

23 swap agreement under any other statute,

24 regulation, or rule, including the Securities

25 Act of 1933, the Securities Exchange Act of
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1 1934, the Public Utility Holding Company

2 Act of 1935, the Trust Indenture Act of

3 1939, the Investment Company Act of 1940,

4 the Investment Advisers Act of 1940, the Se5 curities Investor Protection Act of 1970, the

6 Commodity Exchange Act, and the regula7 tions promulgated by the Securities and Ex8 change Commission or the Commodity Fu9 tures Trading Commission.’’.

10 (g) DEFINITION OF TRANSFER.—Section

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

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

13 ‘‘(viii) TRANSFER.—The term ‘trans14 fer’ means every mode, direct or indirect,

15 absolute or conditional, voluntary or invol16 untary, of disposing of or parting with

17 property or with an interest in property,

18 including retention of title as a security in19 terest and foreclosure of the depository

20 institutions’s equity of redemption.’’.

21 (h) TREATMENT OF QUALIFIED FINANCIAL CON22 TRACTS.—Section 11(e)(8) of the Federal Deposit Insurance

23 Act (12 U.S.C. 1821(e)(8)) is amended—

24 (1) in subparagraph (A), by striking ‘‘paragraph

25 (10)’’ and inserting ‘‘paragraphs (9) and (10)’’;
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1 (2) in subparagraph (A)(i), by striking ‘‘to cause

2 the termination or liquidation’’ and inserting ‘‘such

3 person has to cause the termination, liquidation, or

4 acceleration’’;

5 (3) by amending subparagraph (A)(ii) to read as

6 follows:

7 ‘‘(ii) any right under any security

8 agreement or arrangement or other credit

9 enhancement related to 1 or more qualified

10 financial contracts described in clause (i);’’;

11 and

12 (4) by amending subparagraph (E)(ii) to read

13 as follows:

14 ‘‘(ii) any right under any security

15 agreement or arrangement or other credit

16 enhancement related to 1 or more qualified

17 financial contracts described in clause (i);’’.

18 (i) AVOIDANCE OF TRANSFERS.—Section

19 11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12

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

21 5242 of the Revised Statutes of the United States (12 U.S.C.

22 91) or any other Federal or State law relating to the avoid23 ance of preferential or fraudulent transfers,’’ before ‘‘the

24 Corporation’’.
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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 De4 posit Insurance Act (12 U.S.C. 1821(e)(8)) is amended—

5 (1) in subparagraph (E), by striking ‘‘other than

6 paragraph (12) of this subsection, subsection (d)(9)’’

7 and inserting ‘‘other than subsections (d)(9) and

8 (e)(10)’’; and

9 (2) by adding at the end the following new sub10 paragraphs:

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

12 shall be construed as limiting the right or power

13 of the Corporation, or authorizing any court or

14 agency to limit or delay, in any manner, the

15 right or power of the Corporation to transfer any

16 qualified financial contract in accordance with

17 paragraphs (9) and (10) of this subsection or to

18 disaffirm or repudiate any such contract in ac19 cordance with paragraph (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 clause
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1 shall be enforceable in a qualified financial

2 contract of an insured depository institu3 tion in default.

4 ‘‘(ii) WALKAWAY CLAUSE DEFINED.—

5 For purposes of this subparagraph, the term

6 ‘walkaway clause’ means a provision in a

7 qualified financial contract that, after cal8 culation of a value of a party’s position or

9 an amount due to or from 1 of the parties

10 in accordance with its terms upon termi11 nation, 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.—Sec19 tion 11(e)(12)(A) of the Federal Deposit Insurance Act (12

20 U.S.C. 1821(e)(12)(A)) is amended by inserting ‘‘or the ex21 ercise of rights or powers’’ after ‘‘the appointment’’.

22 SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALI23 FIED FINANCIAL CONTRACTS.

24 (a) TRANSFERS OF QUALIFIED FINANCIAL CONTRACTS

25 TO FINANCIAL INSTITUTIONS.—Section 11(e)(9) of the Fed-
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1 eral Deposit Insurance Act (12 U.S.C. 1821(e)(9)) is

2 amended to read as follows:

3 ‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CON4 TRACTS.—

5 ‘‘(A) IN GENERAL.—In making any transfer

6 of assets or liabilities of a depository institution

7 in default which includes any qualified financial

8 contract, the conservator or receiver for such de9 pository institution shall either—

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

11 other than a financial institution for which

12 a conservator, receiver, trustee in bank13 ruptcy, or other legal custodian has been

14 appointed or which is otherwise the subject

15 of a bankruptcy or insolvency proceeding—

16 ‘‘(I) all qualified financial con17 tracts between any person or any affil18 iate of such person and the depository

19 institution in default;

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

21 any affiliate of such person against

22 such depository institution under any

23 such contract (other than any claim

24 which, under the terms of any such

25 contract, is subordinated to the claims
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1 of general unsecured creditors of such

2 institution);

3 ‘‘(III) all claims of such deposi4 tory institution against such person or

5 any affiliate of such person under any

6 such contract; and

7 ‘‘(IV) all property securing or any

8 other credit enhancement for any con9 tract described in subclause (I) or any

10 claim described in subclause (II) or

11 (III) under any such contract; or

12 ‘‘(ii) transfer none of the qualified fi13 nancial contracts, claims, property or other

14 credit enhancement referred to in clause (i)

15 (with respect to such person and any affil16 iate of such person).

17 ‘‘(B) TRANSFER TO FOREIGN BANK, FOR18 EIGN FINANCIAL INSTITUTION, OR BRANCH OR

19 AGENCY OF A FOREIGN BANK OR FINANCIAL IN20 STITUTION.—In transferring any qualified fi21 nancial contracts and related claims and prop22 erty pursuant to subparagraph (A)(i), the con23 servator or receiver for such depository institu24 tion shall not make such transfer to a foreign

25 bank, financial institution organized under the
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1 laws of a foreign country, or a branch or agency

2 of a foreign bank or financial institution unless,

3 under the law applicable to such bank, financial

4 institution, branch or agency, to the qualified fi5 nancial contracts, and to any netting contract,

6 any security agreement or arrangement or other

7 credit enhancement related to 1 or more qualified

8 financial contracts, the contractual rights of the

9 parties to such qualified financial contracts, net10 ting contracts, security agreements or arrange11 ments, or other credit enhancements are enforce12 able substantially to the same extent as per13 mitted under this section.

14 ‘‘(C) TRANSFER OF CONTRACTS SUBJECT TO

15 THE RULES OF A CLEARING ORGANIZATION.—In

16 the event that a conservator or receiver transfers

17 any qualified financial contract and related

18 claims, property and credit enhancements pursu19 ant to subparagraph (A)(i) and such contract is

20 subject to the rules of a clearing organization,

21 the clearing organization shall not be required to

22 accept the transferee as a member by virtue of

23 the transfer.

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

25 section, the term ‘financial institution’ means a
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1 broker or dealer, a depository institution, a fu2 tures commission merchant, or any other institu3 tion as determined by the Corporation by regula4 tion to be a financial institution.’’.

5 (b) NOTICE TO QUALIFIED FINANCIAL CONTRACT

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

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

8 amended by amending the flush material following clause

9 (ii) to read as follows: ‘‘the conservator or receiver shall no10 tify any person who is a party to any such contract of such

11 transfer by 5:00 p.m. (eastern time) on the business day

12 following the date of the appointment of the receiver, in the

13 case of a receivership, or the business day following such

14 transfer, in the case of a conservatorship.’’.

15 (c) RIGHTS AGAINST RECEIVER AND TREATMENT OF

16 BRIDGE BANKS.—Section 11(e)(10) of the Federal Deposit

17 Insurance Act (12 U.S.C. 1821(e)(10)) is further

18 amended—

19 (1) by redesignating subparagraph (B) as sub20 paragraph (D); and

21 (2) by inserting after subparagraph (A) the fol22 lowing new subparagraphs:

23 ‘‘(B) CERTAIN RIGHTS NOT ENFORCE24 ABLE.—
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1 ‘‘(i) RECEIVERSHIP.—A person who is

2 a party to a qualified financial contract

3 with an insured depository institution may

4 not exercise any right such person has to

5 terminate, liquidate, or net such contract

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

7 404 of the Federal Deposit Insurance Cor8 poration Improvement Act of 1991 solely by

9 reason of or incidental to the appointment

10 of a receiver for the depository institution

11 (or the insolvency or financial condition of

12 the depository institution for which the re13 ceiver has been appointed)—

14 ‘‘(I) until 5:00 p.m. (eastern time)

15 on the business day following the date

16 of the appointment of the receiver; or

17 ‘‘(II) after the person has received

18 notice that the contract has been trans19 ferred pursuant to paragraph (9)(A).

20 ‘‘(ii) CONSERVATORSHIP.—A person

21 who is a party to a qualified financial con22 tract with an insured depository institution

23 may not exercise any right such person has

24 to terminate, liquidate, or net such contract

25 under paragraph (8)(E) or section 403 or
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1 404 of the Federal Deposit Insurance Cor2 poration Improvement Act of 1991, solely

3 by reason of or incidental to the appoint4 ment of a conservator for the depository in5 stitution (or the insolvency or financial

6 condition of the depository institution for

7 which the conservator has been appointed).

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

9 subsection, the Corporation as receiver or

10 conservator of an insured depository insti11 tution shall be deemed to have notified a

12 person who is a party to a qualified finan13 cial contract with such depository institu14 tion if the Corporation has taken steps rea15 sonably calculated to provide notice to such

16 person by the time specified in subpara17 graph (A) of this subsection.

18 ‘‘(C) TREATMENT OF BRIDGE BANKS.—The

19 following institutions shall not be considered a

20 financial institution for which a conservator, re21 ceiver, trustee in bankruptcy, or other legal cus22 todian has been appointed or which is otherwise

23 the subject of a bankruptcy or insolvency pro24 ceeding for purposes of paragraph (9)—

25 ‘‘(i) a bridge bank; or
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1 ‘‘(ii) a depository institution organized

2 by the Corporation, for which a conservator

3 is appointed either—

4 ‘‘(I) immediately upon the organi5 zation of the institution; or

6 ‘‘(II) at the time of a purchase

7 and assumption transaction between

8 such institution and the Corporation

9 as receiver for a depository institution

10 in default.’’.

11 SEC. 5. AMENDMENTS RELATING TO DISAFFIRMANCE OR

12 REPUDIATION OF QUALIFIED FINANCIAL

13 CONTRACTS.

14 (a) IN GENERAL.—Section 11(e) of the Federal Deposit

15 Insurance Act (12 U.S.C. 1821(e)) is further amended—

16 (1) by redesignating paragraphs (11) through

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

18 and

19 (2) by inserting after paragraph (10) the fol20 lowing new paragraph:

21 ‘‘(11) DISAFFIRMANCE OR REPUDIATION OF

22 QUALIFIED FINANCIAL CONTRACTS.—In exercising the

23 rights of disaffirmance or repudiation of a conser24 vator or receiver with respect to any qualified finan25 cial contract to which an insured depository institu-
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1 tion is a party, the conservator or receiver for such

2 institution shall either—

3 ‘‘(A) disaffirm or repudiate all qualified fi4 nancial contracts between—

5 ‘‘(i) any person or any affiliate of such

6 person; and

7 ‘‘(ii) the depository institution in de8 fault; or

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

10 qualified financial contracts referred to in sub11 paragraph (A) (with respect to such person or

12 any affiliate of such person).’’.

13 (b) TECHNICAL AND CONFORMING AMENDMENTS.—

14 Section 11(e)(8) of the Federal Deposit Insurance Act (12

15 U.S.C. 1821(e)(8)), as amended by section 2(i), is further

16 amended in subparagraph (C)(i), by striking ‘‘(11)’’ and

17 inserting ‘‘(12)’’.

18 SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER

19 AGREEMENTS.

20 Section 11(e)(8)(D)(vii) of the Federal Deposit Insur21 ance Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to read

22 as follows:

23 ‘‘(vii) TREATMENT OF MASTER AGREE24 MENT AS 1 AGREEMENT.—Any master

25 agreement for any contract or agreement de-
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•HR 1161 RH1S

1 scribed in any preceding clause of this sub2 paragraph (or any master agreement for

3 such master agreement or agreements), to4 gether with all supplements to such master

5 agreement, shall be treated as a single

6 agreement and a single qualified financial

7 contract. If a master agreement contains

8 provisions relating to agreements or trans9 actions that are not themselves qualified fi10 nancial contracts, the master agreement

11 shall be deemed to be a qualified financial

12 contract only with respect to those trans13 actions that are themselves qualified finan14 cial contracts.’’.

15 SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IM16 PROVEMENT ACT OF 1991.

17 (a) DEFINITIONS.—Section 402 of the Federal Deposit

18 Insurance Corporation Improvement Act of 1991 (12 U.S.C.

19 4402) is amended—

20 (1) in paragraph (2)—

21 (A) by inserting ‘‘or exempt from such reg22 istration pursuant to an order of the Securities

23 and Exchange Commission’’ before the semicolon

24 at the end of subparagraph (A)(ii); and
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•HR 1161 RH1S

1 (B) by inserting ‘‘or that has been granted

2 an exemption pursuant to section 4(c)(1) of such

3 Act’’ before the period at the end of subpara4 graph (B);

5 (2) in paragraph (6)—

6 (A) by redesignating subparagraphs (B)

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

8 respectively;

9 (B) by inserting after subparagraph (A) the

10 following new subparagraph:

11 ‘‘(B) an uninsured national bank or an un12 insured State bank that is a member of the Fed13 eral Reserve System if the national bank or

14 State member bank is not eligible to make appli15 cation to become an insured bank under section

16 5 of the Federal Deposit Insurance Act;’’; and

17 (C) by amending subparagraph (C) (as re18 designated) to read as follows:

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

20 a foreign bank and any branch or agency of the

21 foreign bank, or the foreign bank that established

22 the branch or agency, as those terms are defined

23 in section 1(b) of the International Banking Act

24 of 1978;’’;
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1 (3) in paragraph (11), by adding before the pe2 riod ‘‘and any other clearing organization with which

3 such clearing organization has a netting contract’’;

4 (4) by amending paragraph (14)(A)(i) to read as

5 follows:

6 ‘‘(i) means a contract or agreement be7 tween two or more financial institutions,

8 clearing organizations, or members that

9 provides for netting present or future pay10 ment obligations or payment entitlements

11 (including liquidation or closeout values re12 lating to such obligations or entitlements)

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

14 and

15 (5) by adding at the end the following new para16 graph:

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

18 payment of United States dollars, another currency,

19 or a composite currency, and a noncash delivery, in20 cluding a payment or delivery to liquidate an

21 unmatured obligation.’’.

22 (b) ENFORCEABILITY OF BILATERAL NETTING CON23 TRACTS.—Section 403 of the Federal Deposit Insurance

24 Corporation Improvement Act of 1991 (12 U.S.C. 4403) is

25 amended—
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•HR 1161 RH1S

1 (1) by amending subsection (a) to read as fol2 lows:

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

4 provision of State or Federal law (other than paragraphs

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

6 Deposit Insurance Act or any order authorized under sec7 tion 5(b)(2) of the Securities Investor Protection Act of

8 1970), the covered contractual payment obligations and the

9 covered contractual payment entitlements between any two

10 financial institutions shall be netted in accordance with,

11 and subject to the conditions of, the terms of any applicable

12 netting contract (except as provided in section 561(b)(2) of

13 title 11, United States Code).’’; and

14 (2) by adding at the end the following new sub15 section:

16 ‘‘(f) ENFORCEABILITY OF SECURITY AGREEMENTS.—

17 The provisions of any security agreement or arrangement

18 or other credit enhancement related to 1 or more netting

19 contracts between any two financial institutions shall be

20 enforceable in accordance with their terms (except as pro21 vided in section 561(b)(2) of title 11, United States Code)

22 and shall not be stayed, avoided, or otherwise limited by

23 any State or Federal law (other than paragraphs (8)(E),

24 (8)(F), and (10)(B) of section 11(e) of the Federal Deposit
32

•HR 1161 RH1S

1 Insurance Act and section 5(b)(2) of the Securities Investor

2 Protection Act of 1970).’’.

3 (c) ENFORCEABILITY OF CLEARING ORGANIZATION

4 NETTING CONTRACTS.—Section 404 of the Federal Deposit

5 Insurance Corporation Improvement Act of 1991 (12 U.S.C.

6 4404) is amended—

7 (1) by amending subsection (a) to read as fol8 lows:

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

10 provision of State or Federal law (other than paragraphs

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

12 Deposit Insurance Act and any order authorized under sec13 tion 5(b)(2) of the Securities Investor Protection Act of

14 1970), the covered contractual payment obligations and the

15 covered contractual payment entitlements of a member of

16 a clearing organization to and from all other members of

17 a clearing organization shall be netted in accordance with

18 and subject to the conditions of any applicable netting con19 tract (except as provided in section 561(b)(2) of title 11,

20 United States Code).’’; and

21 (2) by adding at the end the following new sub22 section:

23 ‘‘(h) ENFORCEABILITY OF SECURITY AGREEMENTS.—

24 The provisions of any security agreement or arrangement

25 or other credit enhancement related to 1 or more netting
33

•HR 1161 RH1S

1 contracts between any two members of a clearing organiza2 tion shall be enforceable in accordance with their terms (ex3 cept as provided in section 561(b)(2) of title 11, United

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

5 limited by any State or Federal law (other than paragraphs

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

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

8 Investor Protection Act of 1970).’’.

9 (d) ENFORCEABILITY OF CONTRACTS WITH UNIN10 SURED NATIONAL BANKS AND UNINSURED FEDERAL

11 BRANCHES AND AGENCIES.—The Federal Deposit Insur12 ance Corporation Improvement Act of 1991 (12 U.S.C. 4401

13 et seq.) is amended—

14 (1) by redesignating section 407 as section 407A;

15 and

16 (2) by adding after section 406 the following new

17 section:

18 ‘‘SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED

19 NATIONAL BANKS AND UNINSURED FEDERAL

20 BRANCHES AND AGENCIES.

21 ‘‘(a) IN GENERAL.—Notwithstanding any other provi22 sion of law, paragraphs (8), (9), (10), and (11) of section

23 11(e) of the Federal Deposit Insurance Act shall apply to

24 an uninsured national bank or uninsured Federal branch

25 or Federal agency except—
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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 such Act), the ‘Corpora8 tion, whether acting as such or as conservator or re9 ceiver’, a ‘receiver’, or a ‘conservator’ shall refer to the

10 receiver or conservator of an uninsured national bank

11 or uninsured Federal branch or Federal agency ap12 pointed by the Comptroller of the Currency; and

13 ‘‘(3) any reference to an ‘insured depository in14 stitution’ or ‘depository institution’ shall refer to an

15 uninsured national bank or an uninsured Federal

16 branch or Federal agency.

17 ‘‘(b) LIABILITY.—The liability of a receiver or conser18 vator of an uninsured national bank or uninsured Federal

19 branch or agency shall be determined in the same manner

20 and subject to the same limitations that apply to receivers

21 and conservators of insured depository institutions under

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

23 ‘‘(c) REGULATORY AUTHORITY.—

24 ‘‘(1) IN GENERAL.—The Comptroller of the Cur25 rency, in consultation with the Federal Deposit In-
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•HR 1161 RH1S

1 surance Corporation, may promulgate regulations to

2 implement this section.

3 ‘‘(2) SPECIFIC REQUIREMENT.—In promulgating

4 regulations to implement this section, the Comptroller

5 of the Currency shall ensure that the regulations gen6 erally are consistent with the regulations and policies

7 of the Federal Deposit Insurance Corporation adopted

8 pursuant to the Federal Deposit Insurance Act.

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

10 terms ‘Federal branch’, ‘Federal agency’, and ‘foreign bank’

11 have the same meaning as in section 1(b) of the Inter12 national Banking Act.’’.

13 SEC. 8. BANKRUPTCY CODE AMENDMENTS.

14 (a) DEFINITIONS OF FORWARD CONTRACT, REPUR15 CHASE AGREEMENT, SECURITIES CLEARING AGENCY, SWAP

16 AGREEMENT, COMMODITY CONTRACT, AND SECURITIES

17 CONTRACT.—Title 11, United States Code, is amended—

18 (1) in section 101—

19 (A) in paragraph (25)—

20 (i) by striking ‘‘means a contract’’ and

21 inserting ‘‘means—

22 ‘‘(A) a contract’’;

23 (ii) by striking ‘‘, or any combination

24 thereof or option thereon;’’ and inserting ‘‘,

25 or any other similar agreement;’’; and
36

•HR 1161 RH1S

1 (iii) by adding at the end the fol2 lowing:

3 ‘‘(B) any combination of agreements or

4 transactions referred to in subparagraphs (A)

5 and (C);

6 ‘‘(C) any option to enter into an agreement

7 or transaction referred to in subparagraph (A)

8 or (B);

9 ‘‘(D) a master agreement that provides for

10 an agreement or transaction referred to in sub11 paragraph (A), (B), or (C), together with all

12 supplements to any such master agreement, with13 out regard to whether such master agreement

14 provides for an agreement or transaction that is

15 not a forward contract under this paragraph, ex16 cept that such master agreement shall be consid17 ered to be a forward contract under this para18 graph only with respect to each agreement or

19 transaction under such master agreement that is

20 referred to in subparagraph (A), (B) or (C); or

21 ‘‘(E) any security agreement or arrange22 ment, or other credit enhancement related to any

23 agreement or transaction referred to in subpara24 graph (A), (B), (C), or (D), but not to exceed the
37

•HR 1161 RH1S

1 actual value of such contract on the date of the

2 filing of the petition;’’;

3 (B) in paragraph (46), by striking ‘‘on any

4 day during the period beginning 90 days before

5 the date of’’ and inserting ‘‘at any time before’’;

6 (C) by amending paragraph (47) to read as

7 follows:

8 ‘‘(47) ‘repurchase agreement’ (which definition

9 also applies to a ‘reverse repurchase agreement’)—

10 ‘‘(A) means—

11 ‘‘(i) an agreement, including related

12 terms, which provides for the transfer of 1

13 or more certificates of deposit, mortgage-re14 lated securities (as defined in the Securities

15 Exchange Act of 1934), mortgage loans, in16 terests in mortgage-related securities or

17 mortgage loans, eligible bankers’ accept18 ances, qualified foreign government securi19 ties, or securities that are direct obligations

20 of, or that are fully guaranteed by, the

21 United States or any agency of the United

22 States against the transfer of funds by the

23 transferee of such certificates of deposit, eli24 gible bankers’ acceptances, securities, loans,

25 or interests, with a simultaneous agreement
38

•HR 1161 RH1S

1 by such transferee to transfer to the trans2 feror thereof certificates of deposit, eligible

3 bankers’ acceptance, securities, loans, or in4 terests of the kind described above, at a date

5 certain not later than 1 year after such

6 transfer or on demand, against the transfer

7 of funds;

8 ‘‘(ii) any combination of agreements or

9 transactions referred to in clauses (i) and

10 (iii);

11 ‘‘(iii) an option to enter into an agree12 ment or transaction referred to in clause (i)

13 or (ii);

14 ‘‘(iv) a master agreement that provides

15 for an agreement or transaction referred to

16 in clause (i), (ii), or (iii), together with all

17 supplements to any such master agreement,

18 without regard to whether such master

19 agreement provides for an agreement or

20 transaction that is not a repurchase agree21 ment under this paragraph, except that

22 such master agreement shall be considered

23 to be a repurchase agreement under this

24 paragraph only with respect to each agree25 ment or transaction under the master agree-
39

•HR 1161 RH1S

1 ment that is referred to in clause (i), (ii),

2 or (iii); or

3 ‘‘(v) any security agreement or ar4 rangement or other credit enhancement re5 lated to any agreement or transaction re6 ferred to in clause (i), (ii), (iii), or (iv), but

7 not to exceed the actual value of such con8 tract on the date of the filing of the petition;

9 and

10 ‘‘(B) does not include a repurchase obliga11 tion under a participation in a commercial

12 mortgage loan,

13 and, for purposes of this paragraph, the term ‘quali14 fied foreign government security’ means a security

15 that is a direct obligation of, or that is fully guaran16 teed by, the central government of a member of the

17 Organization for Economic Cooperation and Develop18 ment;’’;

19 (D) in paragraph (48) by inserting ‘‘or ex20 empt from such registration under such section

21 pursuant to an order of the Securities and Ex22 change Commission’’ after ‘‘1934’’; and

23 (E) by amending paragraph (53B) to read

24 as follows:

25 ‘‘(53B) ‘swap agreement’—
40

•HR 1161 RH1S

1 ‘‘(A) means—

2 ‘‘(i) any agreement, including the

3 terms and conditions incorporated by ref4 erence in such agreement, which is an inter5 est rate swap, option, future, or forward

6 agreement, including a rate floor, rate cap,

7 rate collar, cross-currency rate swap, and

8 basis swap; a spot, same day-tomorrow, to9 morrow-next, forward, or other foreign ex10 change or precious metals agreement; a cur11 rency swap, option, future, or forward

12 agreement; an equity index or an equity

13 swap, option, future, or forward agreement;

14 a debt index or a debt swap, option, future,

15 or forward agreement; a credit spread or a

16 credit swap, option, future, or forward

17 agreement; a commodity index or a com18 modity swap, option, future, or forward

19 agreement; or a weather swap, weather de20 rivative, or weather option;

21 ‘‘(ii) any agreement or transaction

22 similar to any other agreement or trans23 action referred to in this paragraph that—

24 ‘‘(I) is presently, or in the future

25 becomes, regularly entered into in the
41

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1 swap market (including terms and

2 conditions incorporated by reference

3 therein); and

4 ‘‘(II) is a forward, swap, future,

5 or option on 1 or more rates, cur6 rencies, commodities, equity securities,

7 or other equity instruments, debt secu8 rities or other debt instruments, or eco9 nomic indices or measures of economic

10 risk or value;

11 ‘‘(iii) any combination of agreements

12 or transactions referred to in this para13 graph;

14 ‘‘(iv) any option to enter into an

15 agreement or transaction referred to in this

16 paragraph;

17 ‘‘(v) a master agreement that provides

18 for an agreement or transaction referred to

19 in clause (i), (ii), (iii), or (iv), together

20 with all supplements to any such master

21 agreement, and without regard to whether

22 the master agreement contains an agree23 ment or transaction that is not a swap

24 agreement under this paragraph, except

25 that the master agreement shall be consid-
42

•HR 1161 RH1S

1 ered to be a swap agreement under this

2 paragraph only with respect to each agree3 ment or transaction under the master agree4 ment that is referred to in clause (i), (ii),

5 (iii), or (iv); or

6 ‘‘(B) any security agreement or arrange7 ment or other credit enhancement related to any

8 agreements or transactions referred to in sub9 paragraph (A), but not to exceed the actual value

10 of such contract on the date of the filing of the

11 petition; and

12 ‘‘(C) is applicable for purposes of this title

13 only and shall not be construed or applied so as

14 to challenge or affect the characterization, defini15 tion, or treatment of any swap agreement under

16 any other statute, regulation, or rule, including

17 the Securities Act of 1933, the Securities Ex18 change Act of 1934, the Public Utility Holding

19 Company Act of 1935, the Trust Indenture Act

20 of 1939, the Investment Company Act of 1940,

21 the Investment Advisers Act of 1940, the Securi22 ties Investor Protection Act of 1970, the Com23 modity Exchange Act, and the regulations pre24 scribed by the Securities and Exchange Commis-
43

•HR 1161 RH1S

1 sion or the Commodity Futures Trading Com2 mission.’’;

3 (2) by amending section 741(7) to read as fol4 lows:

5 ‘‘(7) ‘securities contract’—

6 ‘‘(A) means—

7 ‘‘(i) a contract for the purchase, sale,

8 or loan of a security, a certificate of deposit,

9 a mortgage loan or any interest in a mort10 gage loan, a group or index of securities,

11 certificates of deposit or mortgage loans or

12 interests therein (including an interest

13 therein or based on the value thereof), or op14 tion on any of the foregoing, including an

15 option to purchase or sell any such security,

16 certificate of deposit, loan, interest, group or

17 index, or option;

18 ‘‘(ii) any option entered into on a na19 tional securities exchange relating to foreign

20 currencies;

21 ‘‘(iii) the guarantee by or to any secu22 rities clearing agency of a settlement of

23 cash, securities, certificates of deposit, mort24 gage loans or interests therein, group or

25 index of securities, or mortgage loans or in-
44

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1 terests therein (including any interest there2 in or based on the value thereof), or option

3 on any of the foregoing, including an option

4 to purchase or sell any such security, cer5 tificate of deposit, loan, interest, group or

6 index, or option;

7 ‘‘(iv) any margin loan;

8 ‘‘(v) any other agreement or trans9 action that is similar to an agreement or

10 transaction referred to in this paragraph;

11 ‘‘(vi) any combination of the agree12 ments or transactions referred to in this

13 paragraph;

14 ‘‘(vii) any option to enter into any

15 agreement or transaction referred to in this

16 paragraph;

17 ‘‘(viii) a master agreement that pro18 vides for an agreement or transaction re19 ferred to in clause (i), (ii), (iii), (iv), (v),

20 (vi), or (vii), together with all supplements

21 to any such master agreement, without re22 gard to whether the master agreement pro23 vides for an agreement or transaction that

24 is not a securities contract under this para25 graph, except that such master agreement
45

•HR 1161 RH1S

1 shall be considered to be a securities con2 tract under this paragraph only with re3 spect to each agreement or transaction

4 under such master agreement that is re5 ferred to in clause (i), (ii), (iii), (iv), (v),

6 (vi), or (vii); or

7 ‘‘(ix) any security agreement or ar8 rangement or other credit enhancement re9 lated to any agreement or transaction re10 ferred to in this paragraph, but not to ex11 ceed the actual value of such contract on the

12 date of the filing of the petition; and

13 ‘‘(B) does not include any purchase, sale, or

14 repurchase obligation under a participation in a

15 commercial mortgage loan.’’; and

16 (3) in section 761(4)—

17 (A) by striking ‘‘or’’ at the end of subpara18 graph (D); and

19 (B) by adding at the end the following:

20 ‘‘(F) any other agreement or transaction

21 that is similar to an agreement or transaction

22 referred to in this paragraph;

23 ‘‘(G) any combination of the agreements or

24 transactions referred to in this paragraph;
46

•HR 1161 RH1S

1 ‘‘(H) any option to enter into an agreement

2 or transaction referred to in this paragraph;

3 ‘‘(I) a master agreement that provides for

4 an agreement or transaction referred to in sub5 paragraph (A), (B), (C), (D), (E), (F), (G), or

6 (H), together with all supplements to such mas7 ter agreement, without regard to whether the

8 master agreement provides for an agreement or

9 transaction that is not a commodity contract

10 under this paragraph, except that the master

11 agreement shall be considered to be a commodity

12 contract under this paragraph only with respect

13 to each agreement or transaction under the mas14 ter agreement that is referred to in subparagraph

15 (A), (B), (C), (D), (E), (F), (G), or (H); or

16 ‘‘(J) any security agreement or arrange17 ment or other credit enhancement related to any

18 agreement or transaction referred to in this

19 paragraph, but not to exceed the actual value of

20 such contract on the date of the filing of the peti21 tion;’’.

22 (b) DEFINITIONS OF FINANCIAL INSTITUTION, FINAN23 CIAL PARTICIPANT, AND FORWARD CONTRACT MER24 CHANT.—Section 101 of title 11, United States Code, is

25 amended—
47

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1 (1) by striking paragraph (22) and inserting the

2 following new paragraph:

3 ‘‘(22) the term ‘financial institution’—

4 ‘‘(A) means a Federal reserve bank or an

5 entity (domestic or foreign) that is a commercial

6 or savings bank, industrial savings bank, savings

7 and loan association, trust company, a bank or

8 a corporation organized under section 25A of the

9 Federal Reserve Act and, when any such bank or

10 entity is acting as agent or custodian for a cus11 tomer in connection with a securities contract,

12 as defined in section 741, such customer; and

13 ‘‘(B) includes any person described in sub14 paragraph (A) which operates, or operates as, a

15 multilateral clearing organization pursuant to

16 section 409 of the Federal Deposit Insurance

17 Corporation Improvement Act of 1991;’’;

18 (2) by inserting after paragraph (22) the fol19 lowing:

20 ‘‘(22A) ‘financial participant’ means an entity

21 that, at the time it enters into a securities contract,

22 commodity contract or forward contract, or at the

23 time of the filing of the petition, has 1 or more agree24 ments or transactions described in paragraph (1), (2),

25 (3), (4), (5), or (6) of section 561(a) with the debtor
48

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1 or any other entity (other than an affiliate) of a total

2 gross dollar value of at least $1,000,000,000 in no3 tional or actual principal amount outstanding on

4 any day during the previous 15-month period, or has

5 gross mark-to-market positions of at least

6 $100,000,000 (aggregated across counterparties) in 1

7 or more such agreement or transaction with the debt8 or or any other entity (other than an affiliate) on

9 any day during the previous 15-month period;’’; and

10 (3) by amending paragraph (26) to read as fol11 lows:

12 ‘‘(26) ‘forward contract merchant’ means a Fed13 eral reserve bank, or an entity whose business consists

14 in whole or in part of entering into forward contracts

15 as or with merchants or in a commodity, as defined

16 or in section 761, or any similar good, article, serv17 ice, right, or interest which is presently or in the fu18 ture becomes the subject of dealing or in the forward

19 contract trade;’’.

20 (c) DEFINITION OF MASTER NETTING AGREEMENT

21 AND MASTER NETTING AGREEMENT PARTICIPANT.—Sec22 tion 101 of title 11, United States Code, is amended by in23 serting after paragraph (38) the following new paragraphs:

24 ‘‘(38A) ‘master netting agreement’ means an

25 agreement providing for the exercise of rights, includ-
49

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1 ing rights of netting, setoff, liquidation, termination,

2 acceleration, or closeout, under or in connection with

3 1 or more contracts that are described in any 1 or

4 more of paragraphs (1) through (5) of section 561(a),

5 or any security agreement or arrangement or other

6 credit enhancement related to 1 or more of the fore7 going. If a master netting agreement contains provi8 sions relating to agreements or transactions that are

9 not contracts described in paragraphs (1) through (5)

10 of section 561(a), the master netting agreement shall

11 be deemed to be a master netting agreement only with

12 respect to those agreements or transactions that are

13 described in any 1 or more of the paragraphs (1)

14 through (5) of section 561(a);

15 ‘‘(38B) ‘master netting agreement participant’

16 means an entity that, at any time before the filing of

17 the petition, is a party to an outstanding master net18 ting agreement with the debtor;’’.

19 (d) SWAP AGREEMENTS, SECURITIES CONTRACTS,

20 COMMODITY CONTRACTS, FORWARD CONTRACTS, REPUR21 CHASE AGREEMENTS, AND MASTER NETTING AGREEMENTS

22 UNDER THE AUTOMATIC-STAY.—

23 (1) IN GENERAL.—Section 362(b) of title 11,

24 United States Code, is amended—
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1 (A) in paragraph (6), by inserting ‘‘,

2 pledged to and under the control of,’’ after ‘‘held

3 by’’;

4 (B) in paragraph (7), by inserting ‘‘,

5 pledged to and under the control of,’’ after ‘‘held

6 by’’;

7 (C) by amending paragraph (17) to read as

8 follows:

9 ‘‘(17) under subsection (a), of the setoff by a

10 swap participant of a mutual debt and claim under

11 or in connection with 1 or more swap agreements that

12 constitutes the setoff of a claim against the debtor for

13 any payment or other transfer of property due from

14 the debtor under or in connection with any swap

15 agreement against any payment due to the debtor

16 from the swap participant under or in connection

17 with any swap agreement or against cash, securities,

18 or other property held by, pledged to and under the

19 control of, or due from such swap participant to mar20 gin, guarantee, secure, or settle any swap agree21 ment;’’;

22 (D) in paragraph (18) by striking the pe23 riod at the end and inserting ‘‘; or’’; and

24 (E) by inserting after paragraph (18) the

25 following new paragraph:
51

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1 ‘‘(19) under subsection (a), of the setoff by a

2 master netting agreement participant of a mutual

3 debt and claim under or in connection with 1 or more

4 master netting agreements or any contract or agree5 ment subject to such agreements that constitutes the

6 setoff of a claim against the debtor for any payment

7 or other transfer of property due from the debtor

8 under or in connection with such agreements or any

9 contract or agreement subject to such agreements

10 against any payment due to the debtor from such

11 master netting agreement participant under or in

12 connection with such agreements or any contract or

13 agreement subject to such agreements or against cash,

14 securities, or other property held by, pledged to and

15 under the control of, or due from such master netting

16 agreement participant to margin, guarantee, secure,

17 or settle such agreements or any contract or agree18 ment subject to such agreements, to the extent such

19 participant is eligible to exercise such offset rights

20 under paragraph (6), (7), or (17) for each individual

21 contract covered by the master netting agreement in

22 issue.’’.

23 (2) LIMITATION.—Section 362 of title 11, United

24 States Code, is amended by adding at the end the fol25 lowing:
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1 ‘‘(i) LIMITATION.—The exercise of rights not subject to

2 the stay arising under subsection (a) pursuant to para3 graph (6), (7), or (17), or (32) of subsection (b) shall not

4 be stayed by any order of a court or administrative agency

5 in any proceeding under this title.’’.

6 (e) LIMITATION OF AVOIDANCE POWERS UNDER MAS7 TER NETTING AGREEMENT.—Section 546 of title 11, United

8 States Code, is amended—

9 (1) in subsection (g) (as added by section 103 of

10 Public Law 101–311)—

11 (A) by striking ‘‘under a swap agreement’’;

12 and

13 (B) by striking ‘‘in connection with a swap

14 agreement’’ and inserting ‘‘under or in connec15 tion with any swap agreement’’; and

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

17 ‘‘(j) Notwithstanding sections 544, 545, 547,

18 548(a)(1)(B), and 548(b), the trustee may not avoid a

19 transfer made by or to a master netting agreement partici20 pant under or in connection with any master netting agree21 ment or any individual contract covered thereby that is

22 made before the commencement of the case, except under sec23 tion 548(a)(1)(A), and except to the extent the trustee could

24 otherwise avoid such a transfer made under an individual

25 contract covered by such master netting agreement.’’.
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1 (f) FRAUDULENT TRANSFERS OF MASTER NETTING

2 AGREEMENTS.—Section 548(d)(2) of title 11, United States

3 Code, is amended—

4 (1) in subparagraph (C), by striking ‘‘and’’;

5 (2) in subparagraph (D), by striking the period

6 and inserting ‘‘; and’’; and

7 (3) by adding at the end the following new sub8 paragraph:

9 ‘‘(E) a master netting agreement participant

10 that receives a transfer in connection with a master

11 netting agreement or any individual contract covered

12 thereby takes for value to the extent of such transfer,

13 except, with respect to a transfer under any indi14 vidual contract covered thereby, to the extent such

15 master netting agreement participant otherwise did

16 not take (or is otherwise not deemed to have taken)

17 such transfer for value.’’.

18 (g) TERMINATION OR ACCELERATION OF SECURITIES

19 CONTRACTS.—Section 555 of title 11, United States Code,

20 is amended—

21 (1) by amending the section heading to read as

22 follows:

23 ‘‘§ 555. Contractual right to liquidate, terminate, or

24 accelerate a securities contract’’;

25 and
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1 (2) in the first sentence, by striking ‘‘liquida2 tion’’ and inserting ‘‘liquidation, termination, or ac3 celeration’’.

4 (h) TERMINATION OR ACCELERATION OF COMMOD5 ITIES OR FORWARD CONTRACTS.—Section 556 of title 11,

6 United States Code, is amended—

7 (1) by amending the section heading to read as

8 follows:

9 ‘‘§ 556. Contractual right to liquidate, terminate, or

10 accelerate a commodities contract or for11 ward contract’’;

12 and

13 (2) in the first sentence, by striking ‘‘liquida14 tion’’ and inserting ‘‘liquidation, termination, or ac15 celeration’’.

16 (i) TERMINATION OR ACCELERATION OF REPURCHASE

17 AGREEMENTS.—Section 559 of title 11, United States Code,

18 is amended—

19 (1) by amending the section heading to read as

20 follows:

21 ‘‘§ 559. Contractual right to liquidate, terminate, or

22 accelerate a repurchase agreement’’;

23 and
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1 (2) in the first sentence, by striking ‘‘liquida2 tion’’ and inserting ‘‘liquidation, termination, or ac3 celeration’’.

4 (j) LIQUIDATION, TERMINATION, OR ACCELERATION OF

5 SWAP AGREEMENTS.—Section 560 of title 11, United States

6 Code, is amended—

7 (1) by amending the section heading to read as

8 follows:

9 ‘‘§ 560. Contractual right to liquidate, terminate, or

10 accelerate a swap agreement’’;

11 (2) in the first sentence, by striking ‘‘termi12 nation of a swap agreement’’ and inserting ‘‘liquida13 tion, termination, or acceleration of 1 or more swap

14 agreements’’; and

15 (3) by striking ‘‘in connection with any swap

16 agreement’’ and inserting ‘‘in connection with the ter17 mination, liquidation, or acceleration of 1 or more

18 swap agreements’’.

19 (k) LIQUIDATION, TERMINATION, ACCELERATION, OR

20 OFFSET UNDER A MASTER NETTING AGREEMENT AND

21 ACROSS CONTRACTS.—(1) Title 11, United States Code, is

22 amended by inserting after section 560 the following:
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1 ‘‘§ 561. Contractual right to terminate, liquidate, ac2 celerate, or offset under a master netting

3 agreement and across contracts

4 ‘‘(a) IN GENERAL.—Subject to subsection (b), the exer5 cise of any contractual right, because of a condition of the

6 kind specified in section 365(e)(1), to cause the termination,

7 liquidation, or acceleration of or to offset or net termination

8 values, payment amounts or other transfer obligations aris9 ing under or in connection with 1 or more (or the termi10 nation, liquidation, or acceleration of 1 or more)—

11 ‘‘(1) securities contracts, as defined in section

12 741(7);

13 ‘‘(2) commodity contracts, as defined in section

14 761(4);

15 ‘‘(3) forward contracts;

16 ‘‘(4) repurchase agreements;

17 ‘‘(5) swap agreements; or

18 ‘‘(6) master netting agreements,

19 shall not be stayed, avoided, or otherwise limited by oper20 ation of any provision of this title or by any order of a

21 court or administrative agency in any proceeding under

22 this title.

23 ‘‘(b) EXCEPTION.—

24 ‘‘(1) A party may exercise a contractual right

25 described in subsection (a) to terminate, liquidate, or

26 accelerate only to the extent that such party could ex-
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1 ercise such a right under section 555, 556, 559, or

2 560 for each individual contract covered by the mas3 ter netting agreement in issue.

4 ‘‘(2) If a debtor is a commodity broker subject to

5 subchapter IV of chapter 7—

6 ‘‘(A) a party may not net or offset an obli7 gation to the debtor arising under, or in connec8 tion with, a commodity contract against any

9 claim arising under, or in connection with, other

10 instruments, contracts, or agreements listed in

11 subsection (a), except to the extent the party has

12 positive net equity in the commodity accounts at

13 the debtor, as calculated under such subchapter;

14 and

15 ‘‘(B) another commodity broker may not net

16 or offset an obligation to the debtor arising

17 under, or in connection with, a commodity con18 tract entered into or held on behalf of a customer

19 of the debtor against any claim arising under, or

20 in connection with, other instruments, contracts,

21 or agreements listed in subsection (a).

22 ‘‘(c) RULE OF APPLICATION.—Subparagraphs (A) and

23 (B) of subsection (b)(2) shall not be construed as prohibiting

24 the offset of claims and obligations arising pursuant to—
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1 ‘‘(1) a cross-margining arrangement that has

2 been approved by the Commodity Futures Trading

3 Commission or that has been submitted to such Com4 mission pursuant to section 5a(a)(12) of the Com5 modity Exchange Act and has been permitted to go

6 into effect; or

7 ‘‘(2) another netting arrangement, between a

8 clearing organization (as defined in section 761) and

9 another entity, that has been approved by the Com10 modity Futures Trading Commission.

11 ‘‘(d) DEFINITION.—As used in this section, the term

12 ‘contractual right’ includes a right set forth in a rule or

13 bylaw of a national securities exchange, a national securi14 ties association, or a securities clearing agency, a right set

15 forth in a bylaw of a clearing organization or contract mar16 ket or in a resolution of the governing board thereof, and

17 a right, whether or not evidenced in writing, arising under

18 common law, under law merchant, or by reason of normal

19 business practice.’’.

20 (2) CONFORMING AMENDMENT.—The table of sections

21 of chapter 5 of title 11, United States Code, is amended

22 by inserting after the item relating to section 560 the fol23 lowing:

‘‘561. Contractual right to terminate, liquidate, accelerate, or offset under a master netting agreement and across contracts.’’.
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1 (l) MUNICIPAL BANKRUPTCIES.—Section 901(a) of

2 title 11, United States Code, is amended—

3 (1) by inserting ‘‘555, 556,’’ after ‘‘553,’’; and

4 (2) by inserting ‘‘559, 560, 561, 562,’’ after

5 ‘‘557,’’.

6 (m) ANCILLARY PROCEEDINGS.—Section 304 of title

7 11, United States Code, is amended by adding at the end

8 the following new subsection:

9 ‘‘(d) Any provisions of this title relating to securities

10 contracts, commodity contracts, forward contracts, repur11 chase agreements, swap agreements, or master netting

12 agreements shall apply in a case ancillary to a foreign pro13 ceeding under this section or any other section of this title

14 so that enforcement of contractual provisions of such con15 tracts and agreements in accordance with their terms will

16 not be stayed or otherwise limited by operation of any pro17 vision of this title or by order of a court in any proceeding

18 under this title, and to limit avoidance powers to the same

19 extent as in a proceeding under chapter 7 or 11 (such en20 forcement not to be limited based on the presence or absence

21 of assets of the debtor in the United States).’’.

22 (n) COMMODITY BROKER LIQUIDATIONS.—Title 11,

23 United States Code, is amended by inserting after section

24 766 the following:
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1 ‘‘§ 767. Commodity broker liquidation and forward

2 contract merchants, commodity brokers,

3 stockbrokers, financial institutions, fi4 nancial participants, securities clearing

5 agencies, swap participants, repo partici6 pants, and master netting agreement par7 ticipants

8 ‘‘Notwithstanding any other provision of this title, the

9 exercise of rights by a forward contract merchant, com10 modity broker, stockbroker, financial institution, financial

11 participant, securities clearing agency, swap participant,

12 repo participant, or master netting agreement participant

13 under this title shall not affect the priority of any unsecured

14 claim it may have after the exercise of such rights.’’.

15 (o) STOCKBROKER LIQUIDATIONS.—Title 11, United

16 States Code, is amended by inserting after section 752 the

17 following:

18 ‘‘§ 753. Stockbroker liquidation and forward contract

19 merchants, commodity brokers, stock20 brokers, financial institutions, financial

21 participants, securities clearing agencies,

22 swap participants, repo participants, and

23 master netting agreement participants

24 ‘‘Notwithstanding any other provision of this title, the

25 exercise of rights by a forward contract merchant, com26 modity broker, stockbroker, financial institution, securities
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1 clearing agency, swap participant, repo participant, finan2 cial participant, or master netting agreement participant

3 under this title shall not affect the priority of any unsecured

4 claim it may have after the exercise of such rights.’’.

5 (p) SETOFF.—Section 553 of title 11, United States

6 Code, is amended—

7 (1) in subsection (a)(3)(C), by inserting ‘‘(except

8 for a setoff of a kind described in section 362(b)(6),

9 362(b)(7), 362(b)(17), 362(b)(32), 555, 556, 559, 560

10 or 561)’’ before the period; and

11 (2) in subsection (b)(1), by striking ‘‘362(b)(14)’’

12 and inserting ‘‘362(b)(17), 362(b)(32), 555, 556, 559,

13 560, 561’’.

14 (q) SECURITIES CONTRACTS, COMMODITY CONTRACTS,

15 AND FORWARD CONTRACTS.—Title 11, United States Code,

16 is amended—

17 (1) in section 362(b)(6), by striking ‘‘financial

18 institutions,’’ each place such term appears and in19 serting ‘‘financial institution, financial participant’’;

20 (2) in section 546(e), by inserting ‘‘financial

21 participant,’’ after ‘‘financial institution,’’;

22 (3) in section 548(d)(2)(B), by inserting ‘‘finan23 cial participant,’’ after ‘‘financial institution,’’;

24 (4) in section 555—
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1 (A) by inserting ‘‘financial participant,’’

2 after ‘‘financial institution,’’; and

3 (B) by inserting before the period at the end

4 ‘‘, a right set forth in a bylaw of a clearing orga5 nization or contract market or in a resolution of

6 the governing board thereof, and a right, whether

7 or not in writing, arising under common law,

8 under law merchant, or by reason of normal

9 business practice’’; and

10 (5) in section 556, by inserting ‘‘, financial par11 ticipant’’ after ‘‘commodity broker’’.

12 (r) CONFORMING AMENDMENTS.—Title 11, United

13 States Code, is amended—

14 (1) in the table of sections of chapter 5—

15 (A) by amending the items relating to sec16 tions 555 and 556 to read as follows:

‘‘555. Contractual right to liquidate, terminate, or accelerate a securities contract.

‘‘556. Contractual right to liquidate, terminate, or accelerate a commodities contract or forward contract.’’;

17 and

18 (B) by amending the items relating to sec19 tions 559 and 560 to read as follows:

‘‘559. Contractual right to liquidate, terminate, or accelerate a repurchase agreement.

‘‘560. Contractual right to liquidate, terminate, or accelerate a swap agreement.’’;

20 and

21 (2) in the table of sections of chapter 7—
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1 (A) by inserting after the item relating to

2 section 766 the following:

‘‘767. Commodity broker liquidation and forward contract merchants, commodity

brokers, stockbrokers, financial institutions, financial participants, securities clearing agencies, swap participants, repo participants, and master netting agreement participants.’’;

3 and

4 (B) by inserting after the item relating to

5 section 752 the following:

‘‘753. Stockbroker liquidation and forward contract merchants, commodity brokers, stockbrokers, financial institutions, financial participants,

securities clearing agencies, swap participants, repo participants, and master netting agreement participants.’’.

6 SEC. 9. RECORDKEEPING REQUIREMENTS.

7 Section 11(e)(8) of the Federal Deposit Insurance Act

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

9 the following new subparagraph:

10 ‘‘(H) RECORDKEEPING REQUIREMENTS.—

11 The Corporation, in consultation with the appro12 priate Federal banking agencies, may prescribe

13 regulations requiring more detailed record14 keeping with respect to qualified financial con15 tracts (including market valuations) by insured

16 depository institutions.’’.

17 SEC. 10. EXEMPTIONS FROM CONTEMPORANEOUS EXECU18 TION REQUIREMENT.

19 Section 13(e)(2) of the Federal Deposit Insurance Act

20 (12 U.S.C. 1823(e)(2)) is amended to read as follows:
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1 ‘‘(2) EXEMPTIONS FROM CONTEMPORANEOUS

2 EXECUTION REQUIREMENT.—An agreement to provide

3 for the lawful collateralization of—

4 ‘‘(A) deposits of, or other credit extension

5 by, a Federal, State, or local governmental enti6 ty, or of any depositor referred to in section

7 11(a)(2), including an agreement to provide col8 lateral in lieu of a surety bond;

9 ‘‘(B) bankruptcy estate funds pursuant to

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

11 ‘‘(C) extensions of credit, including any

12 overdraft, from a Federal reserve bank or Federal

13 home loan bank; or

14 ‘‘(D) 1 or more qualified financial con15 tracts, as defined in section 11(e)(8)(D),

16 shall not be deemed invalid pursuant to paragraph

17 (1)(B) solely because such agreement was not executed

18 contemporaneously with the acquisition of the collat19 eral or because of pledges, delivery, or substitution of

20 the collateral made in accordance with such agree21 ment.’’.

22 SEC. 11. DAMAGE MEASURE.

23 (a) IN GENERAL.—Title 11, United States Code, is

24 amended—

25 (1) by inserting after section 561 the following:
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1 ‘‘§ 562. Damage measure in connection with swap

2 agreements, securities contracts, forward

3 contracts, commodity contracts, repur4 chase agreements, or master netting

5 agreements

6 ‘‘If the trustee rejects a swap agreement, securities con7 tract as defined in section 741, forward contract, com8 modity contract (as defined in section 761) repurchase

9 agreement, or master netting agreement pursuant to section

10 365(a), or if a forward contract merchant, stockbroker, fi11 nancial institution, securities clearing agency, repo partici12 pant, financial participant, master netting agreement par13 ticipant, or swap participant liquidates, terminates, or ac14 celerates such contract or agreement, damages shall be

15 measured as of the earlier of—

16 ‘‘(1) the date of such rejection; or

17 ‘‘(2) the date of such liquidation, termination, or

18 acceleration.’’; and

19 (2) in the table of sections of chapter 5 by insert20 ing after the item relating to section 561 the fol21 lowing:

‘‘562. Damage measure in connection with swap agreements, securities contracts,

forward contracts, commodity contracts, repurchase agreements,

or master netting agreements.’’.

22 (b) CLAIMS ARISING FROM REJECTION.—Section

23 502(g) of title 11, United States Code, is amended—
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1 (1) by designating the existing text as paragraph

2 (1); and

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

4 ‘‘(2) A claim for damages calculated in accordance

5 with section 562 shall be allowed under subsection (a), (b),

6 or (c), or disallowed under subsection (d) or (e), as if such

7 claim had arisen before the date of the filing of the peti8 tion.’’.

9 SEC. 12. SIPC STAY.

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

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

12 after subparagraph (B) the following new subparagraph:

13 ‘‘(C) EXCEPTION FROM STAY.—

14 ‘‘(i) Notwithstanding section 362 of

15 title 11, United States Code, neither the fil16 ing of an application under subsection

17 (a)(3) nor any order or decree obtained by

18 the Securities Investor Protection Corpora19 tion from the court shall operate as a stay

20 of any contractual rights of a creditor to

21 liquidate, terminate, or accelerate a securi22 ties contract, commodity contract, forward

23 contract, repurchase agreement, swap agree24 ment, or master netting agreement, each as

25 defined in title 11 United States Code, to
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1 offset or net termination values, payment

2 amounts, or other transfer obligations aris3 ing under or in connection with 1 or more

4 of such contracts or agreements, or to fore5 close on any cash collateral pledged by the

6 debtor whether or not with respect to 1 or

7 more of such contracts or agreements.

8 ‘‘(ii) Notwithstanding clause (i), such

9 application, order, or decree may operate as

10 a stay of the foreclosure on or disposition of

11 securities collateral pledged by the debtor,

12 whether or not with respect to 1 or more of

13 such contracts or agreements, securities sold

14 by the debtor under a repurchase agreement

15 or securities lent under a securities lending

16 agreement.

17 ‘‘(iii) As used in this section, the term

18 ‘contractual right’ includes a right set forth

19 in a rule or bylaw of a national securities

20 exchange, a national securities association,

21 or a securities clearing agency, a right set

22 forth in a bylaw of a clearing organization

23 or contract market or in a resolution of the

24 governing board thereof, and a right, wheth25 er or not in writing, arising under common
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1 law, under law merchant, or by reason of

2 normal business practice.’’.

3 SEC. 13. ASSET-BACKED SECURITIZATIONS.

4 Section 541 of title 11, United States Code, is

5 amended—

6 (1) in subsection (b)—

7 (A) by striking ‘‘or’’ at the end of para8 graph (4)(B)(ii);

9 (B) by redesignating paragraph (5) as

10 paragraph (6); and

11 (C) by inserting after paragraph (4) the fol12 lowing new paragraph:

13 ‘‘(5) any eligible asset (or proceeds thereof), to

14 the extent that such eligible asset was transferred by

15 the debtor before the date of commencement of the

16 case, to an eligible entity in connection with an asset17 backed securitization, except to the extent such asset

18 (or proceeds or value thereof) may be recovered by the

19 trustee under section 550 by virtue of avoidance

20 under section 548(a)(1); or’’; and

21 (2) by adding at the end the following new sub22 section:

23 ‘‘(e) For purposes of this section, the following defini24 tions shall apply:
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1 ‘‘(1) the term ‘asset-backed securitization’ means

2 a transaction in which eligible assets transferred to

3 an eligible entity are used as the source of payment

4 on securities, including all securities issued by gov5 ernmental units, at least 1 class or tranche of which

6 is rated investment grade by 1 or more nationally

7 recognized securities rating organizations, when the

8 securities are initially issued by an issuer;

9 ‘‘(2) the term ‘eligible asset’ means—

10 ‘‘(A) financial assets (including interests

11 therein and proceeds thereof), either fixed or re12 volving, whether or not such assets are in exist13 ence as of the date of the transfer, including resi14 dential and commercial mortgage loans, con15 sumer receivables, trade receivables, assets of gov16 ernmental units (including payment obligations

17 relating to taxes, receipts, fines, tickets, and

18 other sources of revenue), and lease receivables,

19 that, by their terms, convert into cash within a

20 finite time period, plus any residual interest in

21 property subject to receivables included in such

22 financial assets plus any rights or other assets

23 designed to assure the servicing or timely dis24 tribution of proceeds to security holders;

25 ‘‘(B) cash; and
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1 ‘‘(C) securities, including all securities

2 issued by governmental units.

3 ‘‘(3) the term ‘eligible entity’ means—

4 ‘‘(A) an issuer; or

5 ‘‘(B) a trust, corporation, partnership, gov6 ernmental unit, limited liability company (in7 cluding a single member limited liability com8 pany), or other entity engaged exclusively in the

9 business of acquiring and transferring eligible

10 assets directly or indirectly to an issuer and tak11 ing actions ancillary thereto;

12 ‘‘(4) the term ‘issuer’ means a trust, corporation,

13 partnership, governmental unit, limited liability com14 pany (including a single member limited liability

15 company), or other entity engaged exclusively in the

16 business of acquiring and holding eligible assets,

17 issuing securities backed by eligible assets, and taking

18 actions ancillary thereto; and

19 ‘‘(5) the term ‘transferred’ means the debtor, pur20 suant to a written agreement, represented and war21 ranted that eligible assets were sold, contributed, or

22 otherwise conveyed with the intention of removing

23 them from the estate of the debtor pursuant to sub24 section (b)(5) (whether or not reference is made to this
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1 title or any section of this title), irrespective, without

2 limitation, of—

3 ‘‘(A) whether the debtor directly or indi4 rectly obtained or held an interest in the issuer

5 or in any securities issued by the issuer;

6 ‘‘(B) whether the debtor had an obligation

7 to repurchase or to service or supervise the serv8 icing of all or any portion of such eligible assets;

9 or

10 ‘‘(C) the characterization of such sale, con11 tribution, or other conveyance for tax, account12 ing, regulatory reporting, or other purposes.’’.

13 SEC. 14. APPLICATION OF AMENDMENTS.

14 The amendments made by this Act shall apply with

15 respect to cases commenced or appointments made under

16 any Federal or State law after the date of the enactment

17 of this Act, but shall not apply with respect to cases com18 menced or appointments made under any Federal or State

19 law before the date of the enactment of this Act.
Union Calendar No. 492

106TH CONGRESS

2D SESSION H. R. 1161

[Report No. 106–834, Part I]

A BILL

To revise the banking and bankruptcy insolvency

laws with respect to the termination and nettingof financial contracts, and for other purposes.

SEPTEMBER 7, 2000

Reported from the Committee on Banking and Financial

Services with an amendment

SEPTEMBER 7, 2000

Referral to the Committees on the Judiciary and Commerce extended for a period ending not later than September 7, 2000.

SEPTEMBER 7, 2000

The Committees on the Judiciary and Commerce discharged; committed to the Committee of the Whole

House on the State of the Union and ordered to beprinted