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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 Fi-
nancial 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 juris-
diction 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 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 Net-
ting Improvement Act of 2000’’.
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 in-
serting ‘‘, resolution or order’’ after ‘‘any similar agreement
that the Corporation determines by regulation’’.
(b) DEFINITION OF SECURITIES CONTRACT.—Section
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 follows:
‘‘(ii) 
SECURITIES
CONTRACT.—The
term ‘securities contract’—
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‘‘(I) means a contract for the pur-
chase, sale, or loan of a security, a cer-
tificate of deposit, a mortgage loan, or
any interest in a mortgage loan, a
group or index of securities, certificates
of deposit, or mortgage loans or inter-
ests therein (including any interest
therein or based on the value thereof)
or any option on any of the foregoing,
including any option to purchase or
sell any such security, certificate of de-
posit, loan, interest, group or index, or
option;
‘‘(II) does not include any pur-
chase, sale, or repurchase obligation
under a participation in a commercial
mortgage loan unless the Corporation
determines by regulation, resolution, or
order to include any such agreement
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
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any settlement of cash, securities, cer-
tificates of deposit, mortgage loans or
interests therein, group or index of se-
curities, certificates of deposit, or mort-
gage loans or interests therein (includ-
ing 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 security, cer-
tificate of deposit, loan, interest, group
or index, or option;
‘‘(V) means any margin loan;
‘‘(VI) means any other agreement
or transaction that is similar to any
agreement or transaction referred to in
this clause;
‘‘(VII) means any combination of
the agreements or transactions referred
to in this clause;
‘‘(VIII) means any option to enter
into any agreement or transaction re-
ferred to in this clause;
‘‘(IX) means a master agreement
that provides for an agreement or
transaction referred to in subclause (I),
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(III), (IV), (V), (VI), (VII), or (VIII),
together with all supplements to any
such master agreement, without regard
to whether the master agreement pro-
vides for an agreement or transaction
that is not a securities contract under
this clause, except that the master
agreement shall be considered to be a
securities contract under this clause
only with respect to each agreement or
transaction under the master agree-
ment that is referred to in subclause
(I), (III), (IV), (V), (VI), (VII), or
(VIII); and
‘‘(X) means any security agree-
ment or arrangement or other credit
enhancement related to any agreement
or transaction referred to in this
clause.’’.
(c) DEFINITION OF COMMODITY CONTRACT.—Section
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 follows:
‘‘(iii) 
COMMODITY
CONTRACT.—The
term ‘commodity contract’ means—
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‘‘(I) with respect to a futures com-
mission merchant, a contract for the
purchase or sale of a commodity for fu-
ture 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 trans-
action;
‘‘(IV) with respect to a clearing
organization, a contract for the pur-
chase or sale of a commodity for future
delivery on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing organi-
zation, or commodity option traded on,
or subject to the rules of, a contract
market or board of trade that is
cleared by such clearing organization;
‘‘(V) with respect to a commodity
options dealer, a commodity option;
‘‘(VI) any other agreement or
transaction that is similar to any
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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 all supplements to any
such master agreement, without regard
to whether the master agreement pro-
vides for an agreement or transaction
that is not a commodity contract
under this clause, except that the mas-
ter agreement shall be considered to be
a commodity contract under this clause
only with respect to each agreement or
transaction under the master agree-
ment that is referred to in subclause
(I), (II), (III), (IV), (V), (VI), (VII), or
(VIII); or
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‘‘(X) any security agreement or
arrangement 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 com-
modity 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 fu-
ture 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 transaction, reverse re-
purchase 
transaction, 
consignment,
lease, swap, hedge transaction, deposit,
loan, option, allocated transaction,
unallocated transaction, or any other
similar agreement;
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‘‘(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 subclause (I), (II),
or (III), together with all supplements
to any such master agreement, without
regard to whether the master agreement
provides for an agreement or trans-
action that is not a forward contract
under this clause, except that the mas-
ter agreement shall be considered to be
a forward contract under this clause
only with respect to each agreement or
transaction under the master agree-
ment that is referred to in subclause
(I), (II), or (III); or
‘‘(V) any security agreement or
arrangement or other credit enhance-
ment related to any agreement or
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transaction referred to in subclause (I),
(II), (III), or (IV).’’.
(e) DEFINITION OF REPURCHASE AGREEMENT.—Sec-
tion 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 defini-
tion also applies to the term ‘reverse repur-
chase agreement’)—
‘‘(I) means an agreement, includ-
ing related terms, which provides for
the transfer of 1 or more certificates of
deposit, mortgage-related securities (as
such term is defined in the Securities
Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities
or mortgage loans, eligible bankers’ ac-
ceptances, qualified foreign government
securities or securities that are direct
obligations of, or that are fully guaran-
teed by, the United States or any agen-
cy of the United States against the
transfer of funds by the transferee of
such certificates of deposit, eligible
bankers’ acceptances, securities, loans,
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or interests with a simultaneous agree-
ment by such transferee to transfer to
the transferor thereof certificates of de-
posit, eligible bankers’ acceptances, se-
curities, loans, or interests as described
above, at a date certain not later than
1 year after such transfers or on de-
mand, against the transfer of funds, or
any other similar agreement;
‘‘(II) does not include any repur-
chase obligation under a participation
in 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 combination of
agreements or transactions referred to
in subclauses (I) and (IV);
‘‘(IV) means any option to enter
into any agreement or transaction re-
ferred to in subclause (I) or (III);
‘‘(V) means a master agreement
that provides for an agreement or
transaction referred to in subclause (I),
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(III), or (IV), 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 repurchase
agreement under this clause, except
that the master agreement shall be con-
sidered to be a repurchase agreement
under this subclause only with respect
to each agreement or transaction under
the master agreement that is referred to
in subclause (I), (III), or (IV); and
‘‘(VI) means any security agree-
ment or arrangement or other credit
enhancement related to any agreement
or transaction referred to in subclause
(I), (III), (IV), or (V).
For purposes of this clause, the term ‘quali-
fied foreign government security’ means a
security that is a direct obligation of, or
that is fully guaranteed by, the central gov-
ernment of a member of the Organization
for Economic Cooperation and Development
(as determined by regulation or order
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adopted by the appropriate Federal banking
authority).’’.
(f) DEFINITION
OF
SWAP
AGREEMENT.—Section
11(e)(8)(D)(vi) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(vi)) is amended to read as follows:
‘‘(vi) SWAP
AGREEMENT.—The term
‘swap agreement’ means—
‘‘(I) any agreement, including the
terms and conditions incorporated by
reference in any such agreement, which
is an interest rate swap, option, future,
or forward agreement, including a rate
floor, rate cap, rate collar, cross-cur-
rency rate swap, and basis swap; a
spot, same day-tomorrow, tomorrow-
next, forward, or other foreign ex-
change or precious metals agreement; a
currency swap, option, future, or for-
ward agreement; an equity index or eq-
uity swap, option, future, or forward
agreement; a debt index or debt swap,
option, future, or forward agreement; a
credit spread or credit swap, option,
future, or forward agreement; a com-
modity index or commodity swap, op-
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tion, future, or forward agreement; or
a weather swap, weather derivative, or
a weather option;
‘‘(II) any agreement or trans-
action similar to any other agreement
or transaction referred to in this clause
that is presently, or in the future be-
comes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference in
such agreement) and that is a forward,
swap, future, or option on 1 or more
rates, currencies, commodities, equity
securities or other equity instruments,
debt securities or other debt instru-
ments, or economic indices or measures
of economic risk or value;
‘‘(III) any combination of agree-
ments or transactions referred to in
this clause;
‘‘(IV) any option to enter into
any agreement or transaction referred
to in this clause;
‘‘(V) a master agreement that pro-
vides for an agreement or transaction
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referred to in subclause (I), (II), (III),
or (IV), together with all supplements
to any such master agreement, without
regard to whether the master agreement
contains an agreement or transaction
that is not a swap agreement under
this clause, except that the master
agreement shall be considered to be a
swap agreement under this clause only
with respect to each agreement or
transaction under the master agree-
ment that is referred to in subclause
(I), (II), (III), or (IV); and
‘‘(VI) any security agreement or
arrangement or other credit enhance-
ment related to any agreements or
transactions referred to in subpara-
graph (I), (II), (III), (IV), or (V).
Such term is applicable for purposes of this
title only and shall not be construed or ap-
plied so as to challenge or affect the charac-
terization, definition, or treatment of any
swap agreement under any other statute,
regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of
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1934, the Public Utility Holding Company
Act of 1935, the Trust Indenture Act of
1939, the Investment Company Act of 1940,
the Investment Advisers Act of 1940, the Se-
curities Investor Protection Act of 1970, the
Commodity Exchange Act, and the regula-
tions promulgated by the Securities and Ex-
change Commission or the Commodity Fu-
tures 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-
terest and foreclosure of the depository
institutions’s equity of redemption.’’.
(h) TREATMENT
OF
QUALIFIED
FINANCIAL
CON-
TRACTS.—Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (A), by striking ‘‘paragraph
(10)’’ and inserting ‘‘paragraphs (9) and (10)’’;
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(2) in subparagraph (A)(i), by striking ‘‘to cause
the termination or liquidation’’ and inserting ‘‘such
person has to cause the termination, liquidation, or
acceleration’’;
(3) by amending subparagraph (A)(ii) to read as
follows:
‘‘(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);’’;
and
(4) by amending subparagraph (E)(ii) to read
as follows:
‘‘(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);’’.
(i) 
AVOIDANCE
OF
TRANSFERS.—Section
11(e)(8)(C)(i) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(C)(i)) is amended by inserting ‘‘section
5242 of the Revised Statutes of the United States (12 U.S.C.
91) or any other Federal or State law relating to the avoid-
ance of preferential or fraudulent transfers,’’ before ‘‘the
Corporation’’.
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SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT
TO FAILED AND FAILING INSTITUTIONS.
(a) IN GENERAL.—Section 11(e)(8) of the Federal De-
posit Insurance Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (E), by striking ‘‘other than
paragraph (12) of this subsection, subsection (d)(9)’’
and inserting ‘‘other than subsections (d)(9) and
(e)(10)’’; and
(2) by adding at the end the following new sub-
paragraphs:
‘‘(F) CLARIFICATION.—No provision of law
shall be construed as limiting the right or power
of the Corporation, or authorizing any court or
agency to limit or delay, in any manner, the
right or power of the Corporation to transfer any
qualified financial contract in accordance with
paragraphs (9) and (10) of this subsection or to
disaffirm or repudiate any such contract in ac-
cordance with paragraph (1).
‘‘(G) WALKAWAY
CLAUSES
NOT
EFFEC-
TIVE.—
‘‘(i) IN
GENERAL.—Notwithstanding
the provisions of subparagraphs (A) and
(E), and sections 403 and 404 of the Fed-
eral Deposit Insurance Corporation Im-
provement Act of 1991, no walkaway clause
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shall be enforceable in a qualified financial
contract of an insured depository institu-
tion in default.
‘‘(ii) WALKAWAY CLAUSE DEFINED.—
For purposes of this subparagraph, the term
‘walkaway clause’ means a provision in a
qualified financial contract that, after cal-
culation of a value of a party’s position or
an amount due to or from 1 of the parties
in accordance with its terms upon termi-
nation, liquidation, or acceleration of the
qualified financial contract, either does not
create a payment obligation of a party or
extinguishes a payment obligation of a
party in whole or in part solely because of
such party’s status as a nondefaulting
party.’’.
(b) TECHNICAL AND CONFORMING AMENDMENT.—Sec-
tion 11(e)(12)(A) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(12)(A)) is amended by inserting ‘‘or the ex-
ercise of rights or powers’’ after ‘‘the appointment’’.
SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALI-
FIED FINANCIAL CONTRACTS.
(a) TRANSFERS OF QUALIFIED FINANCIAL CONTRACTS
TO FINANCIAL INSTITUTIONS.—Section 11(e)(9) of the Fed-
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eral Deposit Insurance Act (12 U.S.C. 1821(e)(9)) is
amended to read as follows:
‘‘(9) TRANSFER OF QUALIFIED FINANCIAL CON-
TRACTS.—
‘‘(A) IN GENERAL.—In making any transfer
of assets or liabilities of a depository institution
in default which includes any qualified financial
contract, the conservator or receiver for such de-
pository institution shall either—
‘‘(i) transfer to 1 financial institution,
other than a financial institution for which
a conservator, receiver, trustee in bank-
ruptcy, or other legal custodian has been
appointed or which is otherwise the subject
of a bankruptcy or insolvency proceeding—
‘‘(I) all qualified financial con-
tracts between any person or any affil-
iate of such person and the depository
institution in default;
‘‘(II) all claims of such person or
any affiliate of such person against
such depository institution under any
such contract (other than any claim
which, under the terms of any such
contract, is subordinated to the claims
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of general unsecured creditors of such
institution);
‘‘(III) all claims of such deposi-
tory institution against such person or
any affiliate of such person under any
such contract; and
‘‘(IV) all property securing or any
other credit enhancement for any con-
tract described in subclause (I) or any
claim described in subclause (II) or
(III) under any such contract; or
‘‘(ii) transfer none of the qualified fi-
nancial contracts, claims, property or other
credit enhancement referred to in clause (i)
(with respect to such person and any affil-
iate of such person).
‘‘(B) TRANSFER TO FOREIGN BANK, FOR-
EIGN
FINANCIAL
INSTITUTION, OR
BRANCH
OR
AGENCY OF A FOREIGN BANK OR FINANCIAL IN-
STITUTION.—In transferring any qualified fi-
nancial contracts and related claims and prop-
erty pursuant to subparagraph (A)(i), the con-
servator or receiver for such depository institu-
tion shall not make such transfer to a foreign
bank, financial institution organized under the
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laws of a foreign country, or a branch or agency
of a foreign bank or financial institution unless,
under the law applicable to such bank, financial
institution, branch or agency, to the qualified fi-
nancial contracts, and to any netting contract,
any security agreement or arrangement or other
credit enhancement related to 1 or more qualified
financial contracts, the contractual rights of the
parties to such qualified financial contracts, net-
ting contracts, security agreements or arrange-
ments, or other credit enhancements are enforce-
able substantially to the same extent as per-
mitted under this section.
‘‘(C) TRANSFER OF CONTRACTS SUBJECT TO
THE RULES OF A CLEARING ORGANIZATION.—In
the event that a conservator or receiver transfers
any qualified financial contract and related
claims, property and credit enhancements pursu-
ant to subparagraph (A)(i) and such contract is
subject to the rules of a clearing organization,
the clearing organization shall not be required to
accept the transferee as a member by virtue of
the transfer.
‘‘(D) DEFINITION.—For purposes of this
section, the term ‘financial institution’ means a
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broker or dealer, a depository institution, a fu-
tures commission merchant, or any other institu-
tion as determined by the Corporation by regula-
tion to be a financial institution.’’.
(b) NOTICE
TO QUALIFIED FINANCIAL CONTRACT
COUNTERPARTIES.—Section 11(e)(10)(A) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(e)(10)(A)) is
amended by amending the flush material following clause
(ii) to read as follows: ‘‘the conservator or receiver shall no-
tify any person who is a party to any such contract of such
transfer by 5:00 p.m. (eastern time) on the business day
following the date of the appointment of the receiver, in the
case of a receivership, or the business day following such
transfer, in the case of a conservatorship.’’.
(c) RIGHTS AGAINST RECEIVER AND TREATMENT OF
BRIDGE BANKS.—Section 11(e)(10) of the Federal Deposit
Insurance 
Act 
(12 
U.S.C. 
1821(e)(10)) 
is 
further
amended—
(1) by redesignating subparagraph (B) as sub-
paragraph (D); and
(2) by inserting after subparagraph (A) the fol-
lowing new subparagraphs:
‘‘(B) CERTAIN
RIGHTS
NOT
ENFORCE-
ABLE.—
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‘‘(i) RECEIVERSHIP.—A person who is
a party to a qualified financial contract
with an insured depository institution may
not exercise any right such person has to
terminate, liquidate, or net such contract
under paragraph (8)(A) or section 403 or
404 of the Federal Deposit Insurance Cor-
poration Improvement Act of 1991 solely by
reason of or incidental to the appointment
of a receiver for the depository institution
(or the insolvency or financial condition of
the depository institution for which the re-
ceiver has been appointed)—
‘‘(I) until 5:00 p.m. (eastern time)
on the business day following the date
of the appointment of the receiver; or
‘‘(II) after the person has received
notice that the contract has been trans-
ferred pursuant to paragraph (9)(A).
‘‘(ii) CONSERVATORSHIP.—A person
who is a party to a qualified financial con-
tract with an insured depository institution
may not exercise any right such person has
to terminate, liquidate, or net such contract
under paragraph (8)(E) or section 403 or
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404 of the Federal Deposit Insurance Cor-
poration Improvement Act of 1991, solely
by reason of or incidental to the appoint-
ment of a conservator for the depository in-
stitution (or the insolvency or financial
condition of the depository institution for
which the conservator has been appointed).
‘‘(iii) NOTICE.—For purposes of this
subsection, the Corporation as receiver or
conservator of an insured depository insti-
tution shall be deemed to have notified a
person who is a party to a qualified finan-
cial contract with such depository institu-
tion if the Corporation has taken steps rea-
sonably calculated to provide notice to such
person by the time specified in subpara-
graph (A) of this subsection.
‘‘(C) TREATMENT OF BRIDGE BANKS.—The
following institutions shall not be considered a
financial institution for which a conservator, re-
ceiver, trustee in bankruptcy, or other legal cus-
todian has been appointed or which is otherwise
the subject of a bankruptcy or insolvency pro-
ceeding for purposes of paragraph (9)—
‘‘(i) a bridge bank; or
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‘‘(ii) a depository institution organized
by the Corporation, for which a conservator
is appointed either—
‘‘(I) immediately upon the organi-
zation of the institution; or
‘‘(II) at the time of a purchase
and assumption transaction between
such institution and the Corporation
as receiver for a depository institution
in default.’’.
SEC. 5. AMENDMENTS RELATING TO DISAFFIRMANCE OR
REPUDIATION 
OF 
QUALIFIED 
FINANCIAL
CONTRACTS.
(a) IN GENERAL.—Section 11(e) of the Federal Deposit
Insurance Act (12 U.S.C. 1821(e)) is further amended—
(1) by redesignating paragraphs (11) through
(15) as paragraphs (12) through (16), respectively;
and
(2) by inserting after paragraph (10) the fol-
lowing new paragraph:
‘‘(11) DISAFFIRMANCE
OR
REPUDIATION
OF
QUALIFIED FINANCIAL CONTRACTS.—In exercising the
rights of disaffirmance or repudiation of a conser-
vator or receiver with respect to any qualified finan-
cial contract to which an insured depository institu-
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tion is a party, the conservator or receiver for such
institution shall either—
‘‘(A) disaffirm or repudiate all qualified fi-
nancial contracts between—
‘‘(i) any person or any affiliate of such
person; and
‘‘(ii) the depository institution in de-
fault; or
‘‘(B) disaffirm or repudiate none of the
qualified financial contracts referred to in sub-
paragraph (A) (with respect to such person or
any affiliate of such person).’’.
(b) TECHNICAL
AND CONFORMING AMENDMENTS.—
Section 11(e)(8) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)), as amended by section 2(i), is further
amended in subparagraph (C)(i), by striking ‘‘(11)’’ and
inserting ‘‘(12)’’.
SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER
AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to read
as follows:
‘‘(vii) TREATMENT OF MASTER AGREE-
MENT
AS
AGREEMENT.—Any master
agreement for any contract or agreement de-
•HR 1161 RH1S
scribed in any preceding clause of this sub-
paragraph (or any master agreement for
such master agreement or agreements), to-
gether with all supplements to such master
agreement, shall be treated as a single
agreement and a single qualified financial
contract. If a master agreement contains
provisions relating to agreements or trans-
actions that are not themselves qualified fi-
nancial contracts, the master agreement
shall be deemed to be a qualified financial
contract only with respect to those trans-
actions that are themselves qualified finan-
cial contracts.’’.
SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IM-
PROVEMENT ACT OF 1991.
(a) DEFINITIONS.—Section 402 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (12 U.S.C.
4402) is amended—
(1) in paragraph (2)—
(A) by inserting ‘‘or exempt from such reg-
istration pursuant to an order of the Securities
and Exchange Commission’’ before the semicolon
at the end of subparagraph (A)(ii); and
•HR 1161 RH1S
(B) by inserting ‘‘or that has been granted
an exemption pursuant to section 4(c)(1) of such
Act’’ before the period at the end of subpara-
graph (B);
(2) in paragraph (6)—
(A) by redesignating subparagraphs (B)
through (D) as subparagraphs (C) through (E),
respectively;
(B) by inserting after subparagraph (A) the
following new subparagraph:
‘‘(B) an uninsured national bank or an un-
insured State bank that is a member of the Fed-
eral Reserve System if the national bank or
State member bank is not eligible to make appli-
cation to become an insured bank under section
5 of the Federal Deposit Insurance Act;’’; and
(C) by amending subparagraph (C) (as re-
designated) to read as follows:
‘‘(C) a branch or agency of a foreign bank,
a foreign bank and any branch or agency of the
foreign bank, or the foreign bank that established
the branch or agency, as those terms are defined
in section 1(b) of the International Banking Act
of 1978;’’;
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(3) in paragraph (11), by adding before the pe-
riod ‘‘and any other clearing organization with which
such clearing organization has a netting contract’’;
(4) by amending paragraph (14)(A)(i) to read as
follows:
‘‘(i) means a contract or agreement be-
tween two or more financial institutions,
clearing organizations, or members that
provides for netting present or future pay-
ment obligations or payment entitlements
(including liquidation or closeout values re-
lating to such obligations or entitlements)
among the parties to the agreement; and’’;
and
(5) by adding at the end the following new para-
graph:
‘‘(15) PAYMENT.—The term ‘payment’ means a
payment of United States dollars, another currency,
or a composite currency, and a noncash delivery, in-
cluding a payment or delivery to liquidate an
unmatured obligation.’’.
(b) ENFORCEABILITY OF BILATERAL NETTING CON-
TRACTS.—Section 403 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4403) is
amended—
•HR 1161 RH1S
(1) by amending subsection (a) to read as fol-
lows:
‘‘(a) GENERAL RULE.—Notwithstanding any other
provision of State or Federal law (other than paragraphs
(8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal
Deposit Insurance Act or any order authorized under sec-
tion 5(b)(2) of the Securities Investor Protection Act of
1970), the covered contractual payment obligations and the
covered contractual payment entitlements between any two
financial institutions shall be netted in accordance with,
and subject to the conditions of, the terms of any applicable
netting contract (except as provided in section 561(b)(2) of
title 11, United States Code).’’; and
(2) by adding at the end the following new sub-
section:
‘‘(f) ENFORCEABILITY OF SECURITY AGREEMENTS.—
The provisions of any security agreement or arrangement
or other credit enhancement related to 1 or more netting
contracts between any two financial institutions shall be
enforceable in accordance with their terms (except as pro-
vided in section 561(b)(2) of title 11, United States Code)
and shall not be stayed, avoided, or otherwise limited by
any State or Federal law (other than paragraphs (8)(E),
(8)(F), and (10)(B) of section 11(e) of the Federal Deposit
•HR 1161 RH1S
Insurance Act and section 5(b)(2) of the Securities Investor
Protection Act of 1970).’’.
(c) ENFORCEABILITY
OF CLEARING ORGANIZATION
NETTING CONTRACTS.—Section 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (12 U.S.C.
4404) is amended—
(1) by amending subsection (a) to read as fol-
lows:
‘‘(a) GENERAL RULE.—Notwithstanding any other
provision of State or Federal law (other than paragraphs
(8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal
Deposit Insurance Act and any order authorized under sec-
tion 5(b)(2) of the Securities Investor Protection Act of
1970), the covered contractual payment obligations and the
covered contractual payment entitlements of a member of
a clearing organization to and from all other members of
a clearing organization shall be netted in accordance with
and subject to the conditions of any applicable netting con-
tract (except as provided in section 561(b)(2) of title 11,
United States Code).’’; and
(2) by adding at the end the following new sub-
section:
‘‘(h) ENFORCEABILITY OF SECURITY AGREEMENTS.—
The provisions of any security agreement or arrangement
or other credit enhancement related to 1 or more netting
•HR 1161 RH1S
contracts between any two members of a clearing organiza-
tion shall be enforceable in accordance with their terms (ex-
cept as provided in section 561(b)(2) of title 11, United
States Code) and shall not be stayed, avoided, or otherwise
limited by any State or Federal law (other than paragraphs
(8)(E), (8)(F), and (10)(B) of section 11(e) of the Federal
Deposit Insurance Act and section 5(b)(2) of the Securities
Investor Protection Act of 1970).’’.
(d) ENFORCEABILITY
OF CONTRACTS WITH UNIN-
SURED
NATIONAL
BANKS
AND
UNINSURED
FEDERAL
BRANCHES AND AGENCIES.—The Federal Deposit Insur-
ance Corporation Improvement Act of 1991 (12 U.S.C. 4401
et seq.) is amended—
(1) by redesignating section 407 as section 407A;
and
(2) by adding after section 406 the following new
section:
‘‘SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED
NATIONAL BANKS AND UNINSURED FEDERAL
BRANCHES AND AGENCIES.
‘‘(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, paragraphs (8), (9), (10), and (11) of section
11(e) of the Federal Deposit Insurance Act shall apply to
an uninsured national bank or uninsured Federal branch
or Federal agency except—
•HR 1161 RH1S
‘‘(1) any reference to the ‘Corporation as re-
ceiver’ or ‘the receiver or the Corporation’ shall refer
to the receiver of an uninsured national bank or un-
insured Federal branch or Federal agency appointed
by the Comptroller of the Currency;
‘‘(2) any reference to the ‘Corporation’ (other
than in section 11(e)(8)(D) of such Act), the ‘Corpora-
tion, whether acting as such or as conservator or re-
ceiver’, a ‘receiver’, or a ‘conservator’ shall refer to the
receiver or conservator of an uninsured national bank
or uninsured Federal branch or Federal agency ap-
pointed by the Comptroller of the Currency; and
‘‘(3) any reference to an ‘insured depository in-
stitution’ or ‘depository institution’ shall refer to an
uninsured national bank or an uninsured Federal
branch or Federal agency.
‘‘(b) LIABILITY.—The liability of a receiver or conser-
vator of an uninsured national bank or uninsured Federal
branch or agency shall be determined in the same manner
and subject to the same limitations that apply to receivers
and conservators of insured depository institutions under
section 11(e) of the Federal Deposit Insurance Act.
‘‘(c) REGULATORY AUTHORITY.—
‘‘(1) IN GENERAL.—The Comptroller of the Cur-
rency, in consultation with the Federal Deposit In-
•HR 1161 RH1S
surance Corporation, may promulgate regulations to
implement this section.
‘‘(2) SPECIFIC REQUIREMENT.—In promulgating
regulations to implement this section, the Comptroller
of the Currency shall ensure that the regulations gen-
erally are consistent with the regulations and policies
of the Federal Deposit Insurance Corporation adopted
pursuant to the Federal Deposit Insurance Act.
‘‘(d) DEFINITIONS.—For purposes of this section, the
terms ‘Federal branch’, ‘Federal agency’, and ‘foreign bank’
have the same meaning as in section 1(b) of the Inter-
national Banking Act.’’.
SEC. 8. BANKRUPTCY CODE AMENDMENTS.
(a) DEFINITIONS OF FORWARD CONTRACT, REPUR-
CHASE AGREEMENT, SECURITIES CLEARING AGENCY, SWAP
AGREEMENT, COMMODITY CONTRACT, AND SECURITIES
CONTRACT.—Title 11, United States Code, is amended—
(1) in section 101—
(A) in paragraph (25)—
(i) by striking ‘‘means a contract’’ and
inserting ‘‘means—
‘‘(A) a contract’’;
(ii) by striking ‘‘, or any combination
thereof or option thereon;’’ and inserting ‘‘,
or any other similar agreement;’’; and
•HR 1161 RH1S
(iii) by adding at the end the fol-
lowing:
‘‘(B) any combination of agreements or
transactions referred to in subparagraphs (A)
and (C);
‘‘(C) any option to enter into an agreement
or transaction referred to in subparagraph (A)
or (B);
‘‘(D) a master agreement that provides for
an agreement or transaction referred to in sub-
paragraph (A), (B), or (C), together with all
supplements to any such master agreement, with-
out regard to whether such master agreement
provides for an agreement or transaction that is
not a forward contract under this paragraph, ex-
cept that such master agreement shall be consid-
ered to be a forward contract under this para-
graph only with respect to each agreement or
transaction under such master agreement that is
referred to in subparagraph (A), (B) or (C); or
‘‘(E) any security agreement or arrange-
ment, or other credit enhancement related to any
agreement or transaction referred to in subpara-
graph (A), (B), (C), or (D), but not to exceed the
•HR 1161 RH1S
actual value of such contract on the date of the
filing of the petition;’’;
(B) in paragraph (46), by striking ‘‘on any
day during the period beginning 90 days before
the date of’’ and inserting ‘‘at any time before’’;
(C) by amending paragraph (47) to read as
follows:
‘‘(47) ‘repurchase agreement’ (which definition
also applies to a ‘reverse repurchase agreement’)—
‘‘(A) means—
‘‘(i) an agreement, including related
terms, which provides for the transfer of 1
or more certificates of deposit, mortgage-re-
lated securities (as defined in the Securities
Exchange Act of 1934), mortgage loans, in-
terests in mortgage-related securities or
mortgage loans, eligible bankers’ accept-
ances, qualified foreign government securi-
ties, or securities that are direct obligations
of, or that are fully guaranteed by, the
United States or any agency of the United
States against the transfer of funds by the
transferee of such certificates of deposit, eli-
gible bankers’ acceptances, securities, loans,
or interests, with a simultaneous agreement
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by such transferee to transfer to the trans-
feror thereof certificates of deposit, eligible
bankers’ acceptance, securities, loans, or in-
terests of the kind described above, at a date
certain not later than 1 year after such
transfer or on demand, against the transfer
of funds;
‘‘(ii) any combination of agreements or
transactions referred to in clauses (i) and
(iii);
‘‘(iii) an option to enter into an agree-
ment or transaction referred to in clause (i)
or (ii);
‘‘(iv) a master agreement that provides
for an agreement or transaction referred to
in clause (i), (ii), or (iii), together with all
supplements to any such master agreement,
without regard to whether such master
agreement provides for an agreement or
transaction that is not a repurchase agree-
ment under this paragraph, except that
such master agreement shall be considered
to be a repurchase agreement under this
paragraph only with respect to each agree-
ment or transaction under the master agree-
•HR 1161 RH1S
ment that is referred to in clause (i), (ii),
or (iii); or
‘‘(v) any security agreement or ar-
rangement or other credit enhancement re-
lated to any agreement or transaction re-
ferred to in clause (i), (ii), (iii), or (iv), but
not to exceed the actual value of such con-
tract on the date of the filing of the petition;
and
‘‘(B) does not include a repurchase obliga-
tion under a participation in a commercial
mortgage loan,
and, for purposes of this paragraph, the term ‘quali-
fied foreign government security’ means a security
that is a direct obligation of, or that is fully guaran-
teed by, the central government of a member of the
Organization for Economic Cooperation and Develop-
ment;’’;
(D) in paragraph (48) by inserting ‘‘or ex-
empt from such registration under such section
pursuant to an order of the Securities and Ex-
change Commission’’ after ‘‘1934’’; and
(E) by amending paragraph (53B) to read
as follows:
‘‘(53B) ‘swap agreement’—
•HR 1161 RH1S
‘‘(A) means—
‘‘(i) any agreement, including the
terms and conditions incorporated by ref-
erence in such agreement, which is an inter-
est rate swap, option, future, or forward
agreement, including a rate floor, rate cap,
rate collar, cross-currency rate swap, and
basis swap; a spot, same day-tomorrow, to-
morrow-next, forward, or other foreign ex-
change or precious metals agreement; a cur-
rency swap, option, future, or forward
agreement; an equity index or an equity
swap, option, future, or forward agreement;
a debt index or a debt swap, option, future,
or forward agreement; a credit spread or a
credit swap, option, future, or forward
agreement; a commodity index or a com-
modity swap, option, future, or forward
agreement; or a weather swap, weather de-
rivative, or weather option;
‘‘(ii) any agreement or transaction
similar to any other agreement or trans-
action referred to in this paragraph that—
‘‘(I) is presently, or in the future
becomes, regularly entered into in the
•HR 1161 RH1S
swap market (including terms and
conditions incorporated by reference
therein); and
‘‘(II) is a forward, swap, future,
or option on 1 or more rates, cur-
rencies, commodities, equity securities,
or other equity instruments, debt secu-
rities or other debt instruments, or eco-
nomic indices or measures of economic
risk or value;
‘‘(iii) any combination of agreements
or transactions referred to in this para-
graph;
‘‘(iv) any option to enter into an
agreement or transaction referred to in this
paragraph;
‘‘(v) a master agreement that provides
for an agreement or transaction referred to
in clause (i), (ii), (iii), or (iv), together
with all supplements to any such master
agreement, and without regard to whether
the master agreement contains an agree-
ment or transaction that is not a swap
agreement under this paragraph, except
that the master agreement shall be consid-
•HR 1161 RH1S
ered to be a swap agreement under this
paragraph only with respect to each agree-
ment or transaction under the master agree-
ment that is referred to in clause (i), (ii),
(iii), or (iv); or
‘‘(B) any security agreement or arrange-
ment or other credit enhancement related to any
agreements or transactions referred to in sub-
paragraph (A), but not to exceed the actual value
of such contract on the date of the filing of the
petition; and
‘‘(C) is applicable for purposes of this title
only and shall not be construed or applied so as
to challenge or affect the characterization, defini-
tion, or treatment of any swap agreement under
any other statute, regulation, or rule, including
the Securities Act of 1933, the Securities Ex-
change 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 Advisers Act of 1940, the Securi-
ties Investor Protection Act of 1970, the Com-
modity Exchange Act, and the regulations pre-
scribed by the Securities and Exchange Commis-
•HR 1161 RH1S
sion or the Commodity Futures Trading Com-
mission.’’;
(2) by amending section 741(7) to read as fol-
lows:
‘‘(7) ‘securities contract’—
‘‘(A) means—
‘‘(i) a contract for the purchase, sale,
or loan of a security, a certificate of deposit,
a mortgage loan or any interest in a mort-
gage loan, a group or index of securities,
certificates of deposit or mortgage loans or
interests therein (including an interest
therein or based on the value thereof), or op-
tion on any of the foregoing, including an
option to purchase or sell any such security,
certificate of deposit, loan, interest, group or
index, or option;
‘‘(ii) any option entered into on a na-
tional securities exchange relating to foreign
currencies;
‘‘(iii) the guarantee by or to any secu-
rities clearing agency of a settlement of
cash, securities, certificates of deposit, mort-
gage loans or interests therein, group or
index of securities, or mortgage loans or in-
•HR 1161 RH1S
terests therein (including any interest there-
in or based on the value thereof), or option
on any of the foregoing, including an option
to purchase or sell any such security, cer-
tificate of deposit, loan, interest, group or
index, or option;
‘‘(iv) any margin loan;
‘‘(v) any other agreement or trans-
action that is similar to an agreement or
transaction referred to in this paragraph;
‘‘(vi) any combination of the agree-
ments or transactions referred to in this
paragraph;
‘‘(vii) any option to enter into any
agreement or transaction referred to in this
paragraph;
‘‘(viii) a master agreement that pro-
vides for an agreement or transaction re-
ferred to in clause (i), (ii), (iii), (iv), (v),
(vi), or (vii), together with all supplements
to any such master agreement, without re-
gard to whether the master agreement pro-
vides for an agreement or transaction that
is not a securities contract under this para-
graph, except that such master agreement
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shall be considered to be a securities con-
tract under this paragraph only with re-
spect to each agreement or transaction
under such master agreement that is re-
ferred to in clause (i), (ii), (iii), (iv), (v),
(vi), or (vii); or
‘‘(ix) any security agreement or ar-
rangement or other credit enhancement re-
lated to any agreement or transaction re-
ferred to in this paragraph, but not to ex-
ceed the actual value of such contract on the
date of the filing of the petition; and
‘‘(B) does not include any purchase, sale, or
repurchase obligation under a participation in a
commercial mortgage loan.’’; and
(3) in section 761(4)—
(A) by striking ‘‘or’’ at the end of subpara-
graph (D); and
(B) by adding at the end the following:
‘‘(F) any other agreement or transaction
that is similar to an agreement or transaction
referred to in this paragraph;
‘‘(G) any combination of the agreements or
transactions referred to in this paragraph;
•HR 1161 RH1S
‘‘(H) any option to enter into an agreement
or transaction referred to in this paragraph;
‘‘(I) a master agreement that provides for
an agreement or transaction referred to in sub-
paragraph (A), (B), (C), (D), (E), (F), (G), or
(H), together with all supplements to such mas-
ter agreement, without regard to whether the
master agreement provides for an agreement or
transaction that is not a commodity contract
under this paragraph, except that the master
agreement shall be considered to be a commodity
contract under this paragraph only with respect
to each agreement or transaction under the mas-
ter agreement that is referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), or (H); or
‘‘(J) any security agreement or arrange-
ment or other credit enhancement related to any
agreement or transaction referred to in this
paragraph, but not to exceed the actual value of
such contract on the date of the filing of the peti-
tion;’’.
(b) DEFINITIONS OF FINANCIAL INSTITUTION, FINAN-
CIAL
PARTICIPANT, 
AND
FORWARD
CONTRACT
MER-
CHANT.—Section 101 of title 11, United States Code, is
amended—
•HR 1161 RH1S
(1) by striking paragraph (22) and inserting the
following new paragraph:
‘‘(22) the term ‘financial institution’—
‘‘(A) means a Federal reserve bank or an
entity (domestic or foreign) that is a commercial
or savings bank, industrial savings bank, savings
and loan association, trust company, a bank or
a corporation organized under section 25A of the
Federal Reserve Act and, when any such bank or
entity is acting as agent or custodian for a cus-
tomer in connection with a securities contract,
as defined in section 741, such customer; and
‘‘(B) includes any person described in sub-
paragraph (A) which operates, or operates as, a
multilateral clearing organization pursuant to
section 409 of the Federal Deposit Insurance
Corporation Improvement Act of 1991;’’;
(2) by inserting after paragraph (22) the fol-
lowing:
‘‘(22A) ‘financial participant’ means an entity
that, at the time it enters into a securities contract,
commodity contract or forward contract, or at the
time of the filing of the petition, has 1 or more agree-
ments or transactions described in paragraph (1), (2),
(3), (4), (5), or (6) of section 561(a) with the debtor
•HR 1161 RH1S
or any other entity (other than an affiliate) of a total
gross dollar value of at least $1,000,000,000 in no-
tional or actual principal amount outstanding on
any day during the previous 15-month period, or has
gross 
mark-to-market 
positions 
of 
at 
least
$100,000,000 (aggregated across counterparties) in 1
or more such agreement or transaction with the debt-
or or any other entity (other than an affiliate) on
any day during the previous 15-month period;’’; and
(3) by amending paragraph (26) to read as fol-
lows:
‘‘(26) ‘forward contract merchant’ means a Fed-
eral reserve bank, or an entity whose business consists
in whole or in part of entering into forward contracts
as or with merchants or in a commodity, as defined
or in section 761, or any similar good, article, serv-
ice, right, or interest which is presently or in the fu-
ture becomes the subject of dealing or in the forward
contract trade;’’.
(c) DEFINITION
OF MASTER NETTING AGREEMENT
AND MASTER NETTING AGREEMENT PARTICIPANT.—Sec-
tion 101 of title 11, United States Code, is amended by in-
serting after paragraph (38) the following new paragraphs:
‘‘(38A) ‘master netting agreement’ means an
agreement providing for the exercise of rights, includ-
•HR 1161 RH1S
ing rights of netting, setoff, liquidation, termination,
acceleration, or closeout, under or in connection with
1 or more contracts that are described in any 1 or
more of paragraphs (1) through (5) of section 561(a),
or any security agreement or arrangement or other
credit enhancement related to 1 or more of the fore-
going. If a master netting agreement contains provi-
sions relating to agreements or transactions that are
not contracts described in paragraphs (1) through (5)
of section 561(a), the master netting agreement shall
be deemed to be a master netting agreement only with
respect to those agreements or transactions that are
described in any 1 or more of the paragraphs (1)
through (5) of section 561(a);
‘‘(38B) ‘master netting agreement participant’
means an entity that, at any time before the filing of
the petition, is a party to an outstanding master net-
ting agreement with the debtor;’’.
(d) SWAP AGREEMENTS, SECURITIES CONTRACTS,
COMMODITY CONTRACTS, FORWARD CONTRACTS, REPUR-
CHASE AGREEMENTS, AND MASTER NETTING AGREEMENTS
UNDER THE AUTOMATIC-STAY.—
(1) IN
GENERAL.—Section 362(b) of title 11,
United States Code, is amended—
•HR 1161 RH1S
(A) in paragraph (6), by inserting ‘‘,
pledged to and under the control of,’’ after ‘‘held
by’’;
(B) in paragraph (7), by inserting ‘‘,
pledged to and under the control of,’’ after ‘‘held
by’’;
(C) by amending paragraph (17) to read as
follows:
‘‘(17) under subsection (a), of the setoff by a
swap participant of a mutual debt and claim under
or in connection with 1 or more swap agreements that
constitutes the setoff of a claim against the debtor for
any payment or other transfer of property due from
the debtor under or in connection with any swap
agreement against any payment due to the debtor
from the swap participant under or in connection
with any swap agreement or against cash, securities,
or other property held by, pledged to and under the
control of, or due from such swap participant to mar-
gin, guarantee, secure, or settle any swap agree-
ment;’’;
(D) in paragraph (18) by striking the pe-
riod at the end and inserting ‘‘; or’’; and
(E) by inserting after paragraph (18) the
following new paragraph:
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‘‘(19) under subsection (a), of the setoff by a
master netting agreement participant of a mutual
debt and claim under or in connection with 1 or more
master netting agreements or any contract or agree-
ment subject to such agreements that constitutes the
setoff of a claim against the debtor for any payment
or other transfer of property due from the debtor
under or in connection with such agreements or any
contract or agreement subject to such agreements
against any payment due to the debtor from such
master netting agreement participant under or in
connection with such agreements or any contract or
agreement subject to such agreements or against cash,
securities, or other property held by, pledged to and
under the control of, or due from such master netting
agreement participant to margin, guarantee, secure,
or settle such agreements or any contract or agree-
ment subject to such agreements, to the extent such
participant is eligible to exercise such offset rights
under paragraph (6), (7), or (17) for each individual
contract covered by the master netting agreement in
issue.’’.
(2) LIMITATION.—Section 362 of title 11, United
States Code, is amended by adding at the end the fol-
lowing:
•HR 1161 RH1S
‘‘(i) LIMITATION.—The exercise of rights not subject to
the stay arising under subsection (a) pursuant to para-
graph (6), (7), or (17), or (32) of subsection (b) shall not
be stayed by any order of a court or administrative agency
in any proceeding under this title.’’.
(e) LIMITATION OF AVOIDANCE POWERS UNDER MAS-
TER NETTING AGREEMENT.—Section 546 of title 11, United
States Code, is amended—
(1) in subsection (g) (as added by section 103 of
Public Law 101–311)—
(A) by striking ‘‘under a swap agreement’’;
and
(B) by striking ‘‘in connection with a swap
agreement’’ and inserting ‘‘under or in connec-
tion with any swap agreement’’; and
(2) by adding at the end the following:
‘‘(j) 
Notwithstanding 
sections 
544, 
545, 
547,
548(a)(1)(B), and 548(b), the trustee may not avoid a
transfer made by or to a master netting agreement partici-
pant under or in connection with any master netting agree-
ment or any individual contract covered thereby that is
made before the commencement of the case, except under sec-
tion 548(a)(1)(A), and except to the extent the trustee could
otherwise avoid such a transfer made under an individual
contract covered by such master netting agreement.’’.
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(f) FRAUDULENT TRANSFERS OF MASTER NETTING
AGREEMENTS.—Section 548(d)(2) of title 11, United States
Code, is amended—
(1) in subparagraph (C), by striking ‘‘and’’;
(2) in subparagraph (D), by striking the period
and inserting ‘‘; and’’; and
(3) by adding at the end the following new sub-
paragraph:
‘‘(E) a master netting agreement participant
that receives a transfer in connection with a master
netting agreement or any individual contract covered
thereby takes for value to the extent of such transfer,
except, with respect to a transfer under any indi-
vidual contract covered thereby, to the extent such
master netting agreement participant otherwise did
not take (or is otherwise not deemed to have taken)
such transfer for value.’’.
(g) TERMINATION OR ACCELERATION OF SECURITIES
CONTRACTS.—Section 555 of title 11, United States Code,
is amended—
(1) by amending the section heading to read as
follows:
‘‘§ 555. Contractual right to liquidate, terminate, or
accelerate a securities contract’’;
and
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(2) in the first sentence, by striking ‘‘liquida-
tion’’ and inserting ‘‘liquidation, termination, or ac-
celeration’’.
(h) TERMINATION
OR ACCELERATION
OF COMMOD-
ITIES OR FORWARD CONTRACTS.—Section 556 of title 11,
United States Code, is amended—
(1) by amending the section heading to read as
follows:
‘‘§ 556. Contractual right to liquidate, terminate, or
accelerate a commodities contract or for-
ward contract’’;
and
(2) in the first sentence, by striking ‘‘liquida-
tion’’ and inserting ‘‘liquidation, termination, or ac-
celeration’’.
(i) TERMINATION OR ACCELERATION OF REPURCHASE
AGREEMENTS.—Section 559 of title 11, United States Code,
is amended—
(1) by amending the section heading to read as
follows:
‘‘§ 559. Contractual right to liquidate, terminate, or
accelerate a repurchase agreement’’;
and
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(2) in the first sentence, by striking ‘‘liquida-
tion’’ and inserting ‘‘liquidation, termination, or ac-
celeration’’.
(j) LIQUIDATION, TERMINATION, OR ACCELERATION OF
SWAP AGREEMENTS.—Section 560 of title 11, United States
Code, is amended—
(1) by amending the section heading to read as
follows:
‘‘§ 560. Contractual right to liquidate, terminate, or
accelerate a swap agreement’’;
(2) in the first sentence, by striking ‘‘termi-
nation of a swap agreement’’ and inserting ‘‘liquida-
tion, termination, or acceleration of 1 or more swap
agreements’’; and
(3) by striking ‘‘in connection with any swap
agreement’’ and inserting ‘‘in connection with the ter-
mination, liquidation, or acceleration of 1 or more
swap agreements’’.
(k) LIQUIDATION, TERMINATION, ACCELERATION, OR
OFFSET UNDER
A MASTER NETTING AGREEMENT
AND
ACROSS CONTRACTS.—(1) Title 11, United States Code, is
amended by inserting after section 560 the following:
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‘‘§ 561. Contractual right to terminate, liquidate, ac-
celerate, or offset under a master netting
agreement and across contracts
‘‘(a) IN GENERAL.—Subject to subsection (b), the exer-
cise of any contractual right, because of a condition of the
kind specified in section 365(e)(1), to cause the termination,
liquidation, or acceleration of or to offset or net termination
values, payment amounts or other transfer obligations aris-
ing under or in connection with 1 or more (or the termi-
nation, liquidation, or acceleration of 1 or more)—
‘‘(1) securities contracts, as defined in section
741(7);
‘‘(2) commodity contracts, as defined in section
761(4);
‘‘(3) forward contracts;
‘‘(4) repurchase agreements;
‘‘(5) swap agreements; or
‘‘(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by oper-
ation of any provision of this title or by any order of a
court or administrative agency in any proceeding under
this title.
‘‘(b) EXCEPTION.—
‘‘(1) A party may exercise a contractual right
described in subsection (a) to terminate, liquidate, or
accelerate only to the extent that such party could ex-
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ercise such a right under section 555, 556, 559, or
560 for each individual contract covered by the mas-
ter netting agreement in issue.
‘‘(2) If a debtor is a commodity broker subject to
subchapter IV of chapter 7—
‘‘(A) a party may not net or offset an obli-
gation to the debtor arising under, or in connec-
tion with, a commodity contract against any
claim arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a), except to the extent the party has
positive net equity in the commodity accounts at
the debtor, as calculated under such subchapter;
and
‘‘(B) another commodity broker may not net
or offset an obligation to the debtor arising
under, or in connection with, a commodity con-
tract entered into or held on behalf of a customer
of the debtor against any claim arising under, or
in connection with, other instruments, contracts,
or agreements listed in subsection (a).
‘‘(c) RULE OF APPLICATION.—Subparagraphs (A) and
(B) of subsection (b)(2) shall not be construed as prohibiting
the offset of claims and obligations arising pursuant to—
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‘‘(1) a cross-margining arrangement that has
been approved by the Commodity Futures Trading
Commission or that has been submitted to such Com-
mission pursuant to section 5a(a)(12) of the Com-
modity Exchange Act and has been permitted to go
into effect; or
‘‘(2) another netting arrangement, between a
clearing organization (as defined in section 761) and
another entity, that has been approved by the Com-
modity Futures Trading Commission.
‘‘(d) DEFINITION.—As used in this section, the term
‘contractual right’ includes a right set forth in a rule or
bylaw of a national securities exchange, a national securi-
ties association, or a securities clearing agency, a right set
forth in a bylaw of a clearing organization or contract mar-
ket or in a resolution of the governing board thereof, and
a right, whether or not evidenced in writing, arising under
common law, under law merchant, or by reason of normal
business practice.’’.
(2) CONFORMING AMENDMENT.—The table of sections
of chapter 5 of title 11, United States Code, is amended
by inserting after the item relating to section 560 the fol-
lowing:
‘‘561. Contractual right to terminate, liquidate, accelerate, or offset under a mas-
ter netting agreement and across contracts.’’.
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(l) MUNICIPAL BANKRUPTCIES.—Section 901(a) of
title 11, United States Code, is amended—
(1) by inserting ‘‘555, 556,’’ after ‘‘553,’’; and
(2) by inserting ‘‘559, 560, 561, 562,’’ after
‘‘557,’’.
(m) ANCILLARY PROCEEDINGS.—Section 304 of title
11, United States Code, is amended by adding at the end
the following new subsection:
‘‘(d) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repur-
chase agreements, swap agreements, or master netting
agreements shall apply in a case ancillary to a foreign pro-
ceeding under this section or any other section of this title
so that enforcement of contractual provisions of such con-
tracts and agreements in accordance with their terms will
not be stayed or otherwise limited by operation of any pro-
vision of this title or by order of a court in any proceeding
under this title, and to limit avoidance powers to the same
extent as in a proceeding under chapter 7 or 11 (such en-
forcement not to be limited based on the presence or absence
of assets of the debtor in the United States).’’.
(n) COMMODITY BROKER LIQUIDATIONS.—Title 11,
United States Code, is amended by inserting after section
766 the following:
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‘‘§ 767. Commodity broker liquidation and forward
contract merchants, commodity brokers,
stockbrokers, financial institutions, fi-
nancial participants, securities clearing
agencies, swap participants, repo partici-
pants, and master netting agreement par-
ticipants
‘‘Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, com-
modity broker, stockbroker, financial institution, financial
participant, securities clearing agency, swap participant,
repo participant, or master netting agreement participant
under this title shall not affect the priority of any unsecured
claim it may have after the exercise of such rights.’’.
(o) STOCKBROKER LIQUIDATIONS.—Title 11, United
States Code, is amended by inserting after section 752 the
following:
‘‘§ 753. Stockbroker liquidation and forward contract
merchants, 
commodity 
brokers, 
stock-
brokers, financial institutions, financial
participants, securities clearing agencies,
swap participants, repo participants, and
master netting agreement participants
‘‘Notwithstanding any other provision of this title, the
exercise of rights by a forward contract merchant, com-
modity broker, stockbroker, financial institution, securities
•HR 1161 RH1S
clearing agency, swap participant, repo participant, finan-
cial participant, or master netting agreement participant
under this title shall not affect the priority of any unsecured
claim it may have after the exercise of such rights.’’.
(p) SETOFF.—Section 553 of title 11, United States
Code, is amended—
(1) in subsection (a)(3)(C), by inserting ‘‘(except
for a setoff of a kind described in section 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(32), 555, 556, 559, 560
or 561)’’ before the period; and
(2) in subsection (b)(1), by striking ‘‘362(b)(14)’’
and inserting ‘‘362(b)(17), 362(b)(32), 555, 556, 559,
560, 561’’.
(q) SECURITIES CONTRACTS, COMMODITY CONTRACTS,
AND FORWARD CONTRACTS.—Title 11, United States Code,
is amended—
(1) in section 362(b)(6), by striking ‘‘financial
institutions,’’ each place such term appears and in-
serting ‘‘financial institution, financial participant’’;
(2) in section 546(e), by inserting ‘‘financial
participant,’’ after ‘‘financial institution,’’;
(3) in section 548(d)(2)(B), by inserting ‘‘finan-
cial participant,’’ after ‘‘financial institution,’’;
(4) in section 555—
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(A) by inserting ‘‘financial participant,’’
after ‘‘financial institution,’’; and
(B) by inserting before the period at the end
‘‘, a right set forth in a bylaw of a clearing orga-
nization or contract market or in a resolution of
the governing board thereof, and a right, whether
or not in writing, arising under common law,
under law merchant, or by reason of normal
business practice’’; and
(5) in section 556, by inserting ‘‘, financial par-
ticipant’’ after ‘‘commodity broker’’.
(r) CONFORMING AMENDMENTS.—Title 11, United
States Code, is amended—
(1) in the table of sections of chapter 5—
(A) by amending the items relating to sec-
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 con-
tract or forward contract.’’;
and
(B) by amending the items relating to sec-
tions 559 and 560 to read as follows:
‘‘559. Contractual right to liquidate, terminate, or accelerate a repurchase agree-
ment.
‘‘560. Contractual right to liquidate, terminate, or accelerate a swap agreement.’’;
and
(2) in the table of sections of chapter 7—
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(A) by inserting after the item relating to
section 766 the following:
‘‘767. Commodity broker liquidation and forward contract merchants, commodity
brokers, stockbrokers, financial institutions, financial partici-
pants, securities clearing agencies, swap participants, repo par-
ticipants, and master netting agreement participants.’’;
and
(B) by inserting after the item relating to
section 752 the following:
‘‘753. Stockbroker liquidation and forward contract merchants, commodity bro-
kers, stockbrokers, financial institutions, financial participants,
securities clearing agencies, swap participants, repo partici-
pants, and master netting agreement participants.’’.
SEC. 9. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(8)) is amended by adding at the end
the following new subparagraph:
‘‘(H) RECORDKEEPING
REQUIREMENTS.—
The Corporation, in consultation with the appro-
priate Federal banking agencies, may prescribe
regulations requiring more detailed record-
keeping with respect to qualified financial con-
tracts (including market valuations) by insured
depository institutions.’’.
SEC. 10. EXEMPTIONS FROM CONTEMPORANEOUS EXECU-
TION REQUIREMENT.
Section 13(e)(2) of the Federal Deposit Insurance Act
(12 U.S.C. 1823(e)(2)) is amended to read as follows:
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‘‘(2) EXEMPTIONS
FROM
CONTEMPORANEOUS
EXECUTION REQUIREMENT.—An agreement to provide
for the lawful collateralization of—
‘‘(A) deposits of, or other credit extension
by, a Federal, State, or local governmental enti-
ty, or of any depositor referred to in section
11(a)(2), including an agreement to provide col-
lateral in lieu of a surety bond;
‘‘(B) bankruptcy estate funds pursuant to
section 345(b)(2) of title 11, United States Code;
‘‘(C) extensions of credit, including any
overdraft, from a Federal reserve bank or Federal
home loan bank; or
‘‘(D) 1 or more qualified financial con-
tracts, as defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph
(1)(B) solely because such agreement was not executed
contemporaneously with the acquisition of the collat-
eral or because of pledges, delivery, or substitution of
the collateral made in accordance with such agree-
ment.’’.
SEC. 11. DAMAGE MEASURE.
(a) IN GENERAL.—Title 11, United States Code, is
amended—
(1) by inserting after section 561 the following:
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‘‘§ 562. Damage measure in connection with swap
agreements, securities contracts, forward
contracts, commodity contracts, repur-
chase 
agreements, 
or 
master 
netting
agreements
‘‘If the trustee rejects a swap agreement, securities con-
tract as defined in section 741, forward contract, com-
modity contract (as defined in section 761) repurchase
agreement, or master netting agreement pursuant to section
365(a), or if a forward contract merchant, stockbroker, fi-
nancial institution, securities clearing agency, repo partici-
pant, financial participant, master netting agreement par-
ticipant, or swap participant liquidates, terminates, or ac-
celerates such contract or agreement, damages shall be
measured as of the earlier of—
‘‘(1) the date of such rejection; or
‘‘(2) the date of such liquidation, termination, or
acceleration.’’; and
(2) in the table of sections of chapter 5 by insert-
ing after the item relating to section 561 the fol-
lowing:
‘‘562. Damage measure in connection with swap agreements, securities contracts,
forward contracts, commodity contracts, repurchase agreements,
or master netting agreements.’’.
(b) CLAIMS
ARISING
FROM
REJECTION.—Section
502(g) of title 11, United States Code, is amended—
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(1) by designating the existing text as paragraph
(1); and
(2) by adding at the end the following:
‘‘(2) A claim for damages calculated in accordance
with section 562 shall be allowed under subsection (a), (b),
or (c), or disallowed under subsection (d) or (e), as if such
claim had arisen before the date of the filing of the peti-
tion.’’.
SEC. 12. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection
Act of 1970 (15 U.S.C. 78eee(b)(2)) is amended by adding
after subparagraph (B) the following new subparagraph:
‘‘(C) EXCEPTION FROM STAY.—
‘‘(i) Notwithstanding section 362 of
title 11, United States Code, neither the fil-
ing of an application under subsection
(a)(3) nor any order or decree obtained by
the Securities Investor Protection Corpora-
tion from the court shall operate as a stay
of any contractual rights of a creditor to
liquidate, terminate, or accelerate a securi-
ties contract, commodity contract, forward
contract, repurchase agreement, swap agree-
ment, or master netting agreement, each as
defined in title 11 United States Code, to
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offset or net termination values, payment
amounts, or other transfer obligations aris-
ing under or in connection with 1 or more
of such contracts or agreements, or to fore-
close on any cash collateral pledged by the
debtor whether or not with respect to 1 or
more of such contracts or agreements.
‘‘(ii) Notwithstanding clause (i), such
application, order, or decree may operate as
a stay of the foreclosure on or disposition of
securities collateral pledged by the debtor,
whether or not with respect to 1 or more of
such contracts or agreements, securities sold
by the debtor under a repurchase agreement
or securities lent under a securities lending
agreement.
‘‘(iii) As used in this section, the term
‘contractual right’ includes a right set forth
in a rule or bylaw of a national securities
exchange, a national securities association,
or a securities clearing agency, a right set
forth in a bylaw of a clearing organization
or contract market or in a resolution of the
governing board thereof, and a right, wheth-
er or not in writing, arising under common
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law, under law merchant, or by reason of
normal business practice.’’.
SEC. 13. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is
amended—
(1) in subsection (b)—
(A) by striking ‘‘or’’ at the end of para-
graph (4)(B)(ii);
(B) by redesignating paragraph (5) as
paragraph (6); and
(C) by inserting after paragraph (4) the fol-
lowing new paragraph:
‘‘(5) any eligible asset (or proceeds thereof), to
the extent that such eligible asset was transferred by
the debtor before the date of commencement of the
case, to an eligible entity in connection with an asset-
backed securitization, except to the extent such asset
(or proceeds or value thereof) may be recovered by the
trustee under section 550 by virtue of avoidance
under section 548(a)(1); or’’; and
(2) by adding at the end the following new sub-
section:
‘‘(e) For purposes of this section, the following defini-
tions shall apply:
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‘‘(1) the term ‘asset-backed securitization’ means
a transaction in which eligible assets transferred to
an eligible entity are used as the source of payment
on securities, including all securities issued by gov-
ernmental units, at least 1 class or tranche of which
is rated investment grade by 1 or more nationally
recognized securities rating organizations, when the
securities are initially issued by an issuer;
‘‘(2) the term ‘eligible asset’ means—
‘‘(A) financial assets (including interests
therein and proceeds thereof), either fixed or re-
volving, whether or not such assets are in exist-
ence as of the date of the transfer, including resi-
dential and commercial mortgage loans, con-
sumer receivables, trade receivables, assets of gov-
ernmental units (including payment obligations
relating to taxes, receipts, fines, tickets, and
other sources of revenue), and lease receivables,
that, by their terms, convert into cash within a
finite time period, plus any residual interest in
property subject to receivables included in such
financial assets plus any rights or other assets
designed to assure the servicing or timely dis-
tribution of proceeds to security holders;
‘‘(B) cash; and
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title or any section of this title), irrespective, without
limitation, of—
‘‘(A) whether the debtor directly or indi-
rectly obtained or held an interest in the issuer
or in any securities issued by the issuer;
‘‘(B) whether the debtor had an obligation
to repurchase or to service or supervise the serv-
icing of all or any portion of such eligible assets;
or
‘‘(C) the characterization of such sale, con-
tribution, or other conveyance for tax, account-
ing, regulatory reporting, or other purposes.’’.
SEC. 14. APPLICATION OF AMENDMENTS.
The amendments made by this Act shall apply with
respect to cases commenced or appointments made under
any Federal or State law after the date of the enactment
of this Act, but shall not apply with respect to cases com-
menced or appointments made under any Federal or State
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 netting
of 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 Com-
merce extended for a period ending not later than Sep-
tember 7, 2000.
SEPTEMBER 7, 2000
The Committees on the Judiciary and Commerce dis-
charged; committed to the Committee of the Whole
House on the State of the Union and ordered to be
printed