Union Calendar No. 428
105TH CONGRESS
2D SESSION
H. R. 4393
[Report No. 105–688, Part I]
A BILL
To revise the banking and bankruptcy insolvency
laws with respect to the termination and netting
of financial contracts, and for other purposes.
SEPTEMBER 25, 1998
Committee on the Judiciary discharged; committed to the
Committee of the Whole House on the State of the
Union and ordered to be printed
IB
Calendar No. 428
105TH CONGRESS
2D SESSION
H. R. 4393
[Report No. 105–688, 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
AUGUST 4, 1998
Mr. LEACH (for himself and Mr. LAFALCE) 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 com-
mittee concerned
AUGUST 21, 1998
Reported from the Committee on Banking and Financial Services
AUGUST 21, 1998
Committee on Commerce discharged
AUGUST 21, 1998
Referral to the Committee on the Judiciary extended for a period ending not
later than September 25, 1998
SEPTEMBER 25, 1998
Committee on the Judiciary discharged; committed to the Committee of the
Whole House on the State of the Union and ordered to be printed
A BILL
To revise the banking and bankruptcy insolvency laws with
respect to the termination and netting of financial con-
tracts, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Financial Contract
Netting Improvement Act of 1998’’.
SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CON-
SERVATORS OR RECEIVERS OF INSURED DE-
POSITORY INSTITUTIONS.
(a) DEFINITION
OF QUALIFIED FINANCIAL CON-
TRACT.—Section 11(e)(8)(D)(i) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)(D)(i)) is amended by
inserting ‘‘, resolution or order’’ after ‘‘any similar agree-
ment that the Corporation determines by regulation’’.
(b) DEFINITION OF SECURITIES CONTRACT.—Sec-
tion 11(e)(8)(D)(ii) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(8)(D)(ii)) is amended to read as fol-
lows:
‘‘(ii) SECURITIES
CONTRACT.—The
term ‘securities contract’—
‘‘(I) means a contract for the
purchase, sale, or loan of a security,
or any mortgage loan, mortgage relat-
ed security (as defined in section
3(a)(41) of the Securities Exchange
Act of 1934) or interest therein, in-
cluding an option for the purchase or
sale of a security, certificate of de-
posit, or group or index of securities
(including any interest therein or
based on the value thereof) or any op-
tion entered into on a national securi-
ties exchange relating to foreign cur-
rencies, or the guarantee of any settle-
ment of cash or securities by or to a
securities clearing agency, or any
other similar agreement;
‘‘(II) does not include any par-
ticipation in or servicing agreement
for a commercial mortgage loan unless
the Corporation determines by regula-
tion, resolution, or order to include
any such participation within the
meaning of such term;
‘‘(III) means any option entered
into on a national securities exchange
relating to foreign currencies;
‘‘(IV) means the guarantee by or
to any securities clearing agency of
any settlement of cash, securities, cer-
tificates of deposit, mortgage loans or
interest therein, or group or index of
securities, certificates of deposit, or
mortgage loans or interests therein
(including any interest therein or
based on the value thereof) or option
on any of the foregoing, including any
option to purchase or sell any such se-
curity, certificate of deposit, loan, in-
terest, group or index or option;
‘‘(V) means any margin loan;
‘‘(VI) means any other agree-
ment or transaction that is similar to
any agreement or transaction referred
to in this clause;
‘‘(VII) means any combination of
the agreements or transactions re-
ferred to in this clause;
‘‘(VIII) means any option to
enter into any agreement or trans-
action referred to in this clause;
‘‘(IX) means a master agreement
that provides for an agreement or
transaction referred to in subclause
(I), (II), (III), (IV), (V), (VI) or
(VII), together with all supplements
to any such master agreement, with-
out regard to whether the master
agreement provides for an agreement
or transaction that is not a securities
contract under this clause, except that
the master agreement shall be consid-
ered to be a securities contract under
this clause only with respect to each
agreement or transaction under the
master agreement that is referred to
in subclause (I), (II), (III), (IV), (V),
(VI) or (VII); and
‘‘(X) means any security agree-
ment or arrangement or other credit
enhancement related to any agree-
ment or transaction referred to in this
clause.’’.
(c) DEFINITION OF COMMODITY CONTRACT.—Sec-
tion 11(e)(8)(D)(iii) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(8)(D)(iii)) is amended to read as fol-
lows:
‘‘(iii) COMMODITY
CONTRACT.—The
term ‘commodity contract’ means—
‘‘(I) with respect to a futures
commission merchant, a contract for
the purchase or sale of a commodity
for future delivery on, or subject to
the rules of, a contract market or
board of trade;
‘‘(II) with respect to a foreign fu-
tures commission merchant, a foreign
future;
‘‘(III) with respect to a leverage
transaction 
merchant, 
a 
leverage
transaction;
‘‘(IV) with respect to a clearing
organization, a contract for the pur-
chase or sale of a commodity for fu-
ture delivery on, or subject to the
rules of, a contact market or board of
trade that is cleared by such clearing
organization, or commodity option
traded on, or subject to the rules of,
a contact market or board of trade
that is cleared by such clearing orga-
nization;
‘‘(V) with respect to a commodity
options dealer, a commodity option;
‘‘(VI) any other agreement or
transaction that is similar to any
agreement or transaction referred to
in this clause;
‘‘(VII) any combination of the
agreements or transactions referred to
in this clause;
‘‘(VIII) any option to enter into
any agreement or transaction referred
to in this clause;
‘‘(IX) a master agreement that
provides for an agreement or trans-
action referred to in subclause (I),
(II), (III), (IV), (V), (VI), (VII) or
(VIII), together with supplements to
any such master agreement, without
regard to whether the master agree-
ment provides for an agreement or
transaction that is not a commodity
contract under this clause, except that
the master agreement shall be consid-
ered to be a commodity contract
under this clause only with respect to
each agreement or transaction under
the master agreement that is referred
to in subclause (I), (II), (III), (IV),
(V), (VI), (VII) or (VIII); or
‘‘(X) a security agreement or ar-
rangement or other credit enhance-
ment related to any agreement or
transaction 
referred 
to 
in 
this
clause.’’.
(d) DEFINITION OF FORWARD CONTRACT.—Section
11(e)(8)(D)(iv) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(iv)) is amended to read as follows:
‘‘(iv) 
FORWARD
CONTRACT.—The
term ‘forward contract’ means—
‘‘(I) a contract (other than a
commodity contract) for the purchase,
sale, or transfer of a commodity or
any similar good, article, service,
right, or interest which is presently or
in the future becomes the subject of
dealing in the forward contract trade,
or product or byproduct thereof, with
a maturity date more than 2 days
after the date the contract is entered
into, including a repurchase agree-
ment, consignment, lease, swap, hedge
transaction, deposit, loan, option, allo-
cated transaction, unallocated trans-
action, or any other similar agree-
ment;
‘‘(II) any combination of agree-
ments or transactions referred to in
subclauses (I) and (III);
‘‘(III) any option to enter into
any agreement or transaction referred
to in subclause (I) or (II);
‘‘(IV) a master agreement that
provides for an agreement or trans-
action referred to in subclauses (I),
(II), or (III), together with all supple-
ments to any such master agreement,
without regard to whether the master
agreement provides for an agreement
or transaction that is not a forward
contract under this clause, except that
the master agreement shall be consid-
ered to be a forward contract under
this paragraph only with respect to
each agreement or transaction under
the master agreement that is referred
to in subclause (I), (II) or (III); or
‘‘(V) a security agreement or ar-
rangement or other credit enhance-
ment related to any agreement or
transaction referred to in subclause
(I), (II), (III) or (IV).’’.
(e) DEFINITION
OF REPURCHASE AGREEMENT.—
Section 11(e)(8)(D)(v) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)(D)(v)) is amended to read as
follows:
‘‘(v) REPURCHASE AGREEMENT.—The
term ‘repurchase agreement’ (which also
applies to a reverse repurchase agree-
ment)—
‘‘(I) means an agreement, includ-
ing related terms, that provides for
the transfer of certificates of deposit,
mortgage-related securities (as such
term is defined in section 3(a)(41) of
the Securities Exchange Act of 1934),
any mortgage loan, and any interest
in any mortgage loan, eligible bank-
ers’ acceptances, qualified foreign gov-
ernment securities or securities that
are direct obligations of, or that are
fully guaranteed as to principal and
acterization, definition, or treatment of any
swap agreement or any instrument defined
as a swap agreement herein, under any
other statute, regulation, or rule, including
the Securities Act of 1933, the Securities
Exchange Act of 1934, the Public Utility
Holding Company Act of 1935, the Trust
Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Ad-
visers Act of 1940, the Securities Investor
Protection Act of 1970, the Commodity
Exchange Act, and the regulations promul-
gated by the Securities and Exchange
Commission or the Commodity Futures
Trading Commission.’’.
(g) 
DEFINITION
OF
TRANSFER.—Section
11(e)(8)(D)(viii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(viii)) is amended to read as follows:
‘‘(viii) TRANSFER.—The term ‘trans-
fer’ means every mode, direct or indirect,
absolute or conditional, voluntary or invol-
untary, of disposing of or parting with
property or with an interest in property,
including retention of title as a security in-