I
105TH CONGRESS
2D SESSION
H. R. 4393
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
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
interest by, the United States or any
agency of the United States against
the transfer of funds by the transferee
of such certificates of deposit, eligible
bankers’ acceptances, or securities
with a simultaneous agreement by
such transferee to transfer to the
transferor thereof certificates of de-
posit, mortgage-related securities, and
mortgage loan, and any interest in
any mortgage loan, eligible bankers’
acceptances, or securities 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 par-
ticipation in a commercial mortgage
loan unless the Corporation deter-
mines by regulation, resolution, or
order to include any such participa-
tion within the meaning of such term;
‘‘(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (III);
‘‘(IV) means any option to enter
into any agreement or transaction re-
ferred to in subclause (I) or (II);
‘‘(V) means a master agreement
that provides for an agreement or
transaction referred to in subclause
(I), (II) or (III), together with all
supplements, without regard to wheth-
er the master agreement provides for
an agreement or transaction that is
not a repurchase agreement under
this section, except that the master
agreement shall be considered to be a
repurchase agreement under this sub-
clause only with respect to each agree-
ment or transaction under the master
agreement that is referred to in sub-
clause (I), (II) or (III); and
‘‘(VI) means a security agree-
ment or arrangement or other credit
enhancement related to any agree-
ment or transaction referred to in
subclause (I), (II), (III), or (IV).
For purposes of this clause, the term
‘qualified foreign government security’
means a security that is a direct obligation
of, or that is fully guaranteed by, the cen-
tral government of a member of the Orga-
nization for Economic Cooperation and
Development (as determined by regulation
or order adopted by the appropriate Fed-
eral banking authority).’’.
(f) DEFINITION OF SWAP AGREEMENT.—The Fed-
eral 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, includ-
ing 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
exchange agreement; a currency swap,
option, future, or forward agreement;
an equity index or equity swap, op-
tion, future, or forward agreement; a
debt index or debt swap, option, fu-
ture, or forward agreement; a credit
swap, option, future, or forward
agreement; a commodity swap, option,
future, or forward agreement or any
other similar agreement;
‘‘(II) an agreement or trans-
action similar to any other agreement
or transaction referred to in this
clause that is presently, or in the fu-
ture becomes, regularly entered into
in the swap agreement market (in-
cluding terms and conditions incor-
porated by reference in such agree-
ment) and that is a forward, swap, fu-
ture, or option on 1 or more rates,
currencies, commodities, equity securi-
ties or other equity instruments, debt
securities or other debt instruments,
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
provides for an agreement or trans-
action referred to in subclause (I),
(II), (III), or (IV), together with all
supplements to such master agree-
ment, without regard to whether the
master agreement contains an agree-
ment or transaction that is described
in any of those subclauses, except that
the master agreement shall be consid-
ered to be a swap agreement only with
respect to each agreement or trans-
action under the master agreement
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), or (IV).
Such term shall not be construed or ap-
plied so as to challenge or affect the char-
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-
terest and foreclosure of the debtor’s eq-
uity of redemption.’’.
(h) TREATMENT
OF QUALIFIED FINANCIAL CON-
TRACTS.—Section 11(e)(8) of the Federal Deposit Insur-
ance Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (A), by striking ‘‘para-
graph (10)’’ and inserting ‘‘paragraphs (9) and
(10)’’;
(2) in subparagraph (A)(i), by striking ‘‘to
cause the termination or liquidation’’ and inserting
‘‘such person has to cause the termination, liquida-
tion, 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 (12 U.S.C. 91) or any other
Federal or State law relating to the avoidance of pref-
erential or fraudulent transfers,’’ before ‘‘the Corpora-
tion’’.
SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT
TO FAILED AND FAILING INSTITUTIONS.
(a) IN GENERAL.— Section 11(e)(8) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amend-
ed—
(1) in subparagraph (E), by striking ‘‘other
than paragraph (12) of this subsection, subsection
(d)(9)’’ and inserting ‘‘other than subsections (d)(9)
and (d)(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 man-
ner, the right or power of the Corporation to
transfer any qualified financial contract in ac-
cordance with paragraphs (9) and (10) of this
subsection or to disaffirm or repudiate any such
contract in accordance with subsection (e)(1) of
this section.
‘‘(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 shall be enforceable in a qualified fi-
nancial contract of an insured depository
institution 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
calculation of a value of a party’s position
or an amount due to or from 1 of the par-
ties in accordance with its terms upon ter-
mination, 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.—
Section 11(e)(12)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(12)(A)) is amended by inserting
‘‘or the exercise of rights or powers’’ after ‘‘the appoint-
ment’’.
SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALI-
FIED FINANCIAL CONTRACTS.
(a) TRANSFERS
OF QUALIFIED FINANCIAL CON-
TRACTS TO FINANCIAL INSTITUTIONS.—Section 11(e)(9)
of the Federal 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 trans-
fer of assets or liabilities of a depository institu-
tion in default which includes any qualified fi-
nancial contract, the conservator or receiver for
such depository 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 af-
filiate of such person and the deposi-
tory 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
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 any
claim described in subclause (II) or
(III) under any such contract, or any
other credit enhancement for any con-
tract described in clause (I); or
‘‘(ii) transfer none of the qualified fi-
nancial contracts, claims, or property re-
ferred to in clause (i) (with respect to such
person and any affiliate 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
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
financial contracts, and to any netting contract,
the contractual rights of the parties to such
qualified financial contracts are enforceable
substantially to the same extent as permitted
under this section.
‘‘(C) TRANSFER OF CONTRACTS SUBJECT
TO
THE
RULES
OF
A
CLEARING
ORGANIZA-
TION.—In the event that a conservator or re-
ceiver transfers any qualified financial contract
and related claims and property pursuant to
subparagraph (A)(i) and such contract is sub-
ject 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
broker or dealer, a depository institution, a fu-
tures commission merchant, or any other insti-
tution as determined by the Corporation by reg-
ulation 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
notify 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 De-
posit 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.—
‘‘(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 appoint-
ment of a receiver for the depository insti-
tution (or the insolvency or financial condi-
tion of the depository institution for which
the receiver has been appointed)—
‘‘(I) until 5:00 p.m. (eastern
time) on the business day following
the date of the appointment of the re-
ceiver; or
‘‘(II) after the person has re-
ceived notice that the contract has
been transferred pursuant to para-
graph (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 con-
tract under paragraph (8)(E) or sections
403 or 404 of the Federal Deposit Insur-
ance Corporation Improvement Act of
1991, solely by reason of or incidental to
the appointment of a conservator for the
depository institution (or the insolvency or
financial condition of the depository insti-
tution 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
reasonably calculated to provide notice to
such person by the time specified in sub-
paragraph (A) of this subsection.
‘‘(C) TREATMENT
OF
BRIDGE
BANKS.—
The following institutions shall not be consid-
ered a financial institution for which a con-
servator, receiver, trustee in bankruptcy, or
other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding for purposes of sub-
section (e)(9)—
‘‘(i) a bridge bank; or
‘‘(ii) a depository institution organized
by the Corporation, for which a conserva-
tor is appointed either—
‘‘(I) immediately upon the orga-
nization 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.
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 con-
servator or receiver with respect to any qualified fi-
nancial contract to which an insured depository in-
stitution 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).’’.
SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER
AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)(D)(vii)) is amended to
read as follows:
‘‘(vii) 
TREATMENT
OF
MASTER
AGREEMENT AS 1 AGREEMENT.—Any mas-
ter agreement for any contract or agree-
ment described in any preceding clause of
this subparagraph (or any master agree-
ment for such master agreement or agree-
ments), together 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 transactions that are not themselves
qualified financial contracts, the master
agreement shall be deemed to be a quali-
fied financial contract only with respect to
those transactions that are themselves
qualified financial contracts.’’.
SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IM-
PROVEMENT ACT OF 1991.
(a) DEFINITIONS.—Section 402 of the Federal De-
posit Insurance Corporation Improvement Act of 1991 (12
U.S.C. 4402) is amended—
(1) 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
Federal Reserve System if the national bank or
State member bank is not eligible to make ap-
plication to become an insured bank under sec-
tion 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 estab-
lished the branch or agency, as those terms are
defined in section 1(b) of the International
Banking Act of 1978;’’;
(2) in paragraph (11), by adding before the pe-
riod ‘‘and any other clearing organization with which
such clearing organization has a netting contract’’;
(3) by amending paragraph (14)(A)(i) to read
as follows:
‘‘(i) means a contract or agreement
between 2 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
(4) by adding at the end the following new
paragraph:
‘‘(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—
(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
1971, the covered contractual payment obligations and the
covered contractual payment entitlements between any 2
financial institutions shall be netted in accordance with,
and subject to the conditions of, the terms of any applica-
ble netting contract.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(f) 
ENFORCEABILITY
OF
SECURITY
AGREE-
MENTS.—The provisions of any security agreement or ar-
rangement or other credit enhancement related to 1 or
more netting contracts between any 2 financial institu-
tions shall be enforceable in accordance with their terms
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 De-
posit Insurance Act and section 5(b)(2) of the Securities
Investor Protection Act of 1971).’’.
(c) ENFORCEABILITY OF CLEARING ORGANIZATION
NETTING CONTRACTS.—Section 404 of the Federal De-
posit 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
section 5(b)(2) of the Securities Investor Protection Act
of 1971, 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 net-
ting contract.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(h) 
ENFORCEABILITY
OF
SECURITY
AGREE-
MENTS.—The provisions of any security agreement or ar-
rangement or other credit enhancement related to 1 or
more netting contracts between any 2 members of a clear-
ing organization shall be enforceable in accordance with
their terms 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 Securi-
ties Investor Protection Act of 1971.’’.
(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 408;
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 pro-
vision of law, paragraphs (8), (9), 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—
‘‘(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 ‘Cor-
poration, whether acting as such or as conservator
or receiver’, a ‘receiver’, or a ‘conservator’ shall refer
to the receiver or conservator of an uninsured na-
tional bank or uninsured Federal branch or Federal
agency appointed by the Comptroller of the Cur-
rency; 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 con-
servator of an uninsured national bank or uninsured Fed-
eral 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 institu-
tions under section 11(e) of the Federal Deposit Insurance
Act.
‘‘(c) REGULATORY AUTHORITY.—
‘‘(1) IN
GENERAL.—The Comptroller of the
Currency, in consultation with the Federal Deposit
Insurance Corporation, may promulgate regulations
to implement this section.
‘‘(2) SPECIFIC REQUIREMENT.—In promulgat-
ing regulations to implement this section, the Comp-
troller of the Currency shall ensure that the regula-
tions generally are consistent with the regulations
and policies of the Federal Deposit Insurance Cor-
poration 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
International Banking Act.’’.
SEC. 8. BANKRUPTCY CODE AMENDMENTS.
(a) DEFINITIONS OF SWAP AGREEMENT, SECURITIES
CONTRACT, FORWARD
CONTRACT, COMMODITY
CON-
TRACT, 
AND
REPURCHASE
AGREEMENT.—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
(iii) by adding at the end the follow-
ing new subparagraphs:
‘‘(B) any combination of agreements or
transactions referred to in subparagraphs (A)
and (C);
‘‘(C) any option to enter into any agree-
ment 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,
without regard to whether the master agree-
ment provides for an agreement or transaction
that is not a forward contract under this para-
graph, except that the master agreement shall
be considered to be a forward contract under
this paragraph only with respect to each agree-
ment or transaction under the master agree-
ment that is referred to in subparagraph (A),
(B) or (C); or
loans or interests with a simultaneous
agreement by such transferee to transfer
to the transferor thereof certificates of de-
posit, eligible bankers’ acceptances, securi-
ties, loans, or interests as described above,
at a date certain not later than 1 year
after such transfers or on demand, against
the transfer of funds; or any other similar
agreement; and
‘‘(ii) any combination of agreements
or transactions referred to in clauses (i)
and (iii);
‘‘(iii) any option to enter into any
agreement or transaction referred to in
clause (i) or (ii);
‘‘(iv) a master agreement that pro-
vides for an agreement or transaction re-
ferred to in clauses (i), (ii) or (iii), to-
gether with all supplements, without re-
gard to whether the master agreement pro-
vides for an agreement or transaction that
is not a repurchase agreement under this
subparagraph, except that the master
agreement shall be considered to be a re-
purchase agreement under this subpara-
graph only with respect to each agreement
or transaction under the master agreement
that is referred to in clause (i), (ii) or (iii);
or
‘‘(v) a security agreement or arrange-
ment or other credit enhancement related
to any agreement or transaction referred
to in clauses (i), (ii), (iii) or (iv); and
‘‘(B) does not include any repurchase obli-
gation 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 Devel-
opment.’’; and
(C) by amending paragraph (53B) to read
as follows:
‘‘(53B) the term ‘swap agreement’—
‘‘(A) means—
‘‘(i) any agreement, including the
terms and conditions incorporated by ref-
erence in any such agreement, which is an
interest rate swap, option, future, or for-
ward agreement, including a rate floor,
rate cap, rate collar, cross-currency rate
swap, and basis swap; a spot, same day-to-
morrow, tomorrow-next, forward, or other
foreign exchange or precious metals agree-
ment; a currency swap, option, future, or
forward agreement; an equity index or eq-
uity swap, option, future, or forward agree-
ment; a debt index or debt swap, option,
future, or forward agreement; a credit
spread or credit swap, option, future, or
forward agreement; a commodity index or
commodity swap, option, future, or forward
agreement;
‘‘(ii) any agreement similar to any
other agreement or transaction referred to
in this subparagraph that—
‘‘(I) is presently, or in the future
becomes, regularly entered into in the
swap agreement 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 se-
curities or other debt instruments, or
economic indices or measures of eco-
nomic risk or value;
‘‘(iii) any combination of agreements
or transactions referred to in this subpara-
graph;
‘‘(iv) any option to enter into any
agreement or transaction referred to in
this subparagraph;
‘‘(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, without regard to whether the
master agreement contains an agreement
or transaction that is described in any of
such clause, except that the master agree-
ment shall be considered to be a swap
agreement only with respect to each agree-
ment or transaction under the master
agreement that is referred to in clause (i),
(ii), (iii), or (iv); or
‘‘(C) is applicable for purposes of this title
only and shall not be construed or applied to
challenge or affect the characterization, defini-
tion, 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 Advisers
Act of 1940, the Securities Investor Protection
Act of 1970, the Commodity Exchange Act, and
the regulations prescribed by the Securities and
Exchange Commission or the Commodity Fu-
tures Trading Commission.’’;
(2) by amending section 741(7) to read as fol-
lows:
‘‘(7) the term ‘securities contract’—
‘‘(A) means—
‘‘(i) a contract for the purchase, sale,
or loan of a security, a certificate of de-
posit, a mortgage loan or any interest in a
mortgage loan, or a group or index of se-
curities, certificates of deposit, or mort-
gage 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 security, certificate of deposit,
loan, interest, group or index or option;
‘‘(ii) any option entered into on a na-
tional securities exchange relating to for-
eign currencies;
‘‘(iii) the guarantee by or to any secu-
rities clearing agency of any settlement of
cash, securities, certificates 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 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 any agreement or
transaction referred to in this subpara-
graph;
‘‘(vi) any combination of the agree-
ments or transactions referred to in this
subparagraph;
‘‘(vii) any option to enter into any
agreement or transaction referred to in
this subparagraph;
‘‘(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 sub-
paragraph, except that the master agree-
ment shall be considered to be a securities
contract under this subparagraph only with
respect to each agreement or transaction
under the master agreement that is re-
ferred to in clause (i), (ii), (iii), (iv), (v),
(vi), or (vii); and
‘‘(ix) any security agreement or ar-
rangement or other credit enhancement re-
lated to any agreement or transaction re-
ferred to in this subparagraph; and
‘‘(B) does not include any purchase, sale,
or repurchase obligation under a participation
in or servicing agreement for 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 new
subparagraphs:
‘‘(F) any other agreement or transaction
that is similar to any agreement or transaction
referred to in this paragraph;
‘‘(G) any combination of the agreements or
transactions referred to in this paragraph;
‘‘(H) any option to enter into any agree-
ment or transaction referred to in this para-
graph;
‘‘(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 any such
master agreement, without regard to whether
the master agreement provides for an agree-
ment 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 master agreement that is referred to
in subparagraph (A), (B), (C), (D), (E), (F),
(G) or (H); or
‘‘(J) a security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in this
paragraph;’’.
(b) DEFINITIONS OF FINANCIAL INSTITUTION, FI-
NANCIAL PARTICIPANT, AND FORWARD CONTRACT MER-
CHANT.—Section 101 of title 11, United States Code, is
amended—
(1) by amending paragraph (22) to read as fol-
lows:
‘‘(22) the term ‘financial institution’ means a
Federal reserve bank, or a person that is a commer-
cial or savings bank, industrial savings bank, savings
and loan association, trust company, or receiver or
conservator for such person and, when any such
Federal reserve bank, receiver, or conservator or
person acting as agent or custodian for a customer
in connection with a securities contract, as defined
in section 741(7) of this title, such customer;’’;
(2) by inserting after paragraph (22) the fol-
lowing new paragraph:
‘‘(22A) the term ‘financial participant’ means
any 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 agreements or transactions that is described in
section 561(a)(2) with the debtor or any other entity
(other than an affiliate) of a total gross dollar value
of at least $1,000,000,000 in notional 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 (aggre-
gated across counterparties) in 1 or more such
agreements or transactions with the debtor or any
other entity (other than an affiliate) on any day dur-
ing the previous 15-month period;’’; and
(3) by amending paragraph (26) to read as fol-
lows:
‘‘(26) the term ‘forward contract merchant’
means a Federal reserve bank, or a person whose
business consists in whole or in part of entering into
forward contracts as or with merchants or in a com-
modity, as defined or in section 761(8) of this title,
or any similar good, article, service, right, or interest
which is presently or in the future becomes the sub-
ject 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
inserting after paragraph (38) the following new para-
graphs:
‘‘(38A) the term ‘master netting agreement’
means an agreement providing for the exercise of
rights, including rights of netting, setoff, liquidation,
termination, acceleration, or closeout, under or in
connection with 1 or more contracts that are de-
scribed 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 foregoing. If a master netting
agreement contains provisions relating to agree-
ments or transactions that are not contracts de-
scribed 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) the term ‘master netting agreement
participant’ means an entity that, at any time before
the filing of the petition, is a party to an outstand-
ing master netting agreement with the debtor;’’.
(d) SWAP AGREEMENTS, SECURITIES CONTRACTS,
COMMODITY CONTRACTS, FORWARD CONTRACTS, REPUR-
CHASE AGREEMENTS, AND MASTER NETTING AGREE-
MENTS UNDER THE AUTOMATIC-STAY.—
(1) IN GENERAL.—Section 362(b) of title 11,
United States Code, is amended—
(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 any mutual debt and claim
under or in connection with 1 or more swap agree-
ments that constitute the setoff of a claim against
the debtor for any payment 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 of the debtor held by, pledged to, and
under the control of, or due from such swap partici-
pant to guarantee, secure, or settle any swap agree-
ment;’’;
(D) in paragraph (18), by striking the pe-
riod and inserting ‘‘; or’’; and
(E) by inserting after paragraph (18) the
following new paragraph:
‘‘(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 to the extent such
participant could offset the claim 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 following new subsection:
‘‘(i) LIMITATION.—The exercise of rights not subject
to the stay arising under subsection (a) pursuant to para-
graph (6), (7), (17), or (19) 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
MASTER 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’’;
(B) by striking ‘‘in connection with a swap
agreement’’ and inserting ‘‘under or in connec-
tion with any swap agreement’’;
(2) by redesignating subsection (g) (as added
by section 222(a) of Public Law 103–394) as sub-
section (i); and
(3) by inserting before subsection (i) (as redes-
ignated) the following new subsection:
‘‘(h) Notwithstanding sections 544, 545, 547,
548(a)(2), and 548(b) of this title, to the extent that
under subsection (e), (f), or (g), the trustee may not avoid
a transfer made by or to a master netting agreement par-
ticipant under or in connection with each individual con-
tract covered by any master netting agreement that is
made before the commencement of the case, the trustee
may not avoid a transfer made by or to such master net-
ting agreement participant under or in connection with the
master netting agreement in issue, except under section
548(a)(1) of this title.’’.
(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 partici-
pant that receives a transfer in connection with
a master netting agreement takes for value to
the extent of such transfer, but only to the ex-
tent that such participant would take for value
under paragraph (B), (C), or (D) for each indi-
vidual contract covered by the master netting
agreement in issue.’’.
(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
‘‘Contractual right to liquidate, termi-
nate, or accelerate a securities contract’’;
and
(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
‘‘Contractual right to liquidate, termi-
nate, or accelerate a commodities con-
tract or forward contract’’; and
(2) in the first sentence, by striking ‘‘liquida-
tion’’ and inserting ‘‘liquidation, termination, or ac-
celeration’’.
(i) TERMINATION
OR ACCELERATION
OF REPUR-
CHASE AGREEMENTS.—Section 559 of title 11, United
States Code, is amended—
(1) by amending the section heading to read
‘‘Contractual right to liquidate, termi-
nate, or accelerate a repurchase agree-
ment’’; and
(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
‘‘Contractual right to liquidate, termi-
nate, or accelerate a swap agreement’’;
and
(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
termination, liquidation, or acceleration of 1 or more
swap agreements’’.
(k) LIQUIDATION, TERMINATION, ACCELERATION, OR
OFFSET UNDER A MASTER NETTING AGREEMENT AND
ACROSS CONTRACTS.—Title 11, United States Code, is
amended by inserting after section 560 the following new
section:
‘‘§ 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 ex-
ercise of any contractual right, because of a condition of
the kind specified in section 365(e)(1), to cause the termi-
nation, liquidation, or acceleration of or to offset, or net
termination values, payment amounts or other transfer ob-
ligations arising under or in connection with 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
exercise such a right under section 555, 556, 559,
or 560 for each individual contract covered by the
master netting agreement in issue.
‘‘(2)(A) A party may not exercise a contractual
right described in subsection (a) to offset or to net
obligations arising under, or in connection with, a
commodity contract against obligations arising
under, or in connection with, any instrument listed
in subsection (a) if the obligations are not mutual.
‘‘(B) If a debtor is a commodity broker subject
to subchapter IV of chapter 7 of this title, a party
may not net or offset an obligation to the debtor
arising under, or in connection with, a commodity
contract against any claim arising under, or in con-
nection with, other instruments listed in subsection
(a) if the party has no positive net equity in the
commodity account at the debtor, as calculated
under subchapter IV.
‘‘(c) 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
market 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.’’.
(l) MUNICIPAL BANKRUPTCIES.—Section 901 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 of this
title (such enforcement 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 new section:
‘‘§ 767. Commodity broker liquidation and forward
contract merchants, commodity brokers,
stockbrokers, financial institutions, secu-
rities clearing agencies, swap partici-
pants, repo participants, and master net-
ting agreement participants
‘‘Notwithstanding any other provision of this title,
the exercise of rights by a forward contract merchant,
commodity broker, stockbroker, financial institution, secu-
rities 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 or affect the provi-
sions of this subchapter IV regarding customer property
or distributions.’’.
(o) STOCKBROKER LIQUIDATIONS.—Title 11, United
States Code, is amended by inserting after section 752 the
following new section:
‘‘§ 753. Stockbroker liquidation and forward contract
merchants, commodity brokers, stock-
brokers, financial institutions, 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,
commodity broker, stockbroker, financial institution, secu-
rities 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 rights or affect the provisions
of this subchapter regarding customer property or dis-
tributions.’’.
(p) SETOFF.—Section 553 of title 11, United States
Code, is amended—
(1) in subsection (a)(3)(C), by inserting ‘‘(ex-
cept for a setoff of a kind described in section
362(b)(6), 362(b)(7), 362(b)(17), 555, 556, 559,
560, or 561 of this title)’’ before the period; and
(2) 
in 
subsection 
(b)(1), 
by 
striking
‘‘362(b)(14),’’ and inserting ‘‘362(b)(17), 555, 556,
559, 560, 561’’.
(q) SECURITIES
CONTRACTS, COMMODITY
CON-
TRACTS, 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 ‘‘fi-
nancial participant’’ after ‘‘financial institution,’’;
(4) in section 555—
(A) by inserting ‘‘financial participant’’
after ‘‘financial institution,’’; and
(B) by inserting before the period ‘‘, a
right set forth in a bylaw of a clearing organi-
zation or contract market or in a resolution of
the governing board thereof, and a right,
whether or not in writing, arising under com-
mon 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) TECHNICAL AND CONFORMING AMENDMENT.—
Section 104 of title 11, United States Code, is amended
by adding at the end the following new subsection:
‘‘(c) EXCEPTION FOR CERTAIN DEFINED TERMS.—
No adjustments shall be made under this section to the
dollar amounts set forth in the definition of the term ‘fi-
nancial participant’ in section 101(22A).’’.
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 ap-
propriate Federal banking agencies, may pre-
scribe regulations requiring more detailed rec-
ordkeeping with respect to qualified financial
contracts (including market valuations) by in-
sured 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:
‘‘(2) EXEMPTIONS
FROM
CONTEMPORANEOUS
EXECUTION REQUIREMENT.—An agreement to pro-
vide for the lawful collateralization of—
‘‘(A) deposits of, or other credit extension
by, a Federal, State, or local governmental en-
tity, 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 Fed-
eral 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 exe-
cuted contemporaneously with the acquisition of the
collateral or because of pledges, delivery, or substi-
tution of the collateral made in accordance with such
agreement.’’.
SEC. 11. DAMAGE MEASURE.
(a) Title 11, United States Code, is amended by in-
serting after section 561 (as added by section 7(k)) the
following new section:
‘‘§ 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
contract as defined in section 741 of this title, forward
contract, repurchase agreement, or master netting agree-
ment pursuant to section 365(a) of this title, or if a for-
ward contract merchant, stockbroker, financial institution,
securities clearing agency, repo participant, master net-
ting agreement participant, or swap participant liquidates,
terminates, or accelerates any 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.’’.
(b) CLAIMS ARISING FROM REJECTION.—Section
502(g) of title 11, United States Code, is amended—
(1) by designating the existing text as para-
graph (1); and
(2) by adding at the end the following new
paragraph:
‘‘(2) A claim for damages calculated in accord-
ance with section 562 of this title shall be allowed
under subsection (a),(b), or (c) of this section or dis-
allowed under subsection (d) or (e) of this section as
if such claim had arisen before the date of the filing
of the petition.’’.
SEC. 12. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is
amended—
(1) in subsection (b), by striking ‘‘or’’ at the
end of paragraph (4);
(2) by redesignating paragraph (5) of sub-
section (b) as paragraph (6);
(3) by inserting after paragraph (4) of sub-
section (b) the following 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 recov-
ered by the trustee under section 550 by virtue of
avoidance under section 548(a); or’’; and
(4) by adding at the end the following new sub-
section:
‘‘(e) DEFINITIONS.—For purposes of this section, the
following definitions shall apply:
‘‘(1) 
ASSET-BACKED
SECURITIZATION.—The
term ‘asset-backed securitization’ means a trans-
action in which eligible assets transferred to an eligi-
ble entity are used as the source of payment on se-
curities, the most senior of which are rated invest-
ment grade by 1 or more nationally recognized secu-
rities rating organizations, issued by an issuer;
‘‘(2) ELIGIBLE
ASSET.—The term ‘eligible
asset’ means—
‘‘(A) financial assets (including interests
therein and proceeds thereof), either fixed or re-
volving, including residential and commercial
mortgage loans, consumer receivables, trade re-
ceivables, and lease receivables, that, by their
terms, convert into cash within a finite time pe-
riod, plus any rights or other assets designed to
assure the servicing or timely distribution of
proceeds to security holders;
‘‘(B) cash; and
‘‘(C) securities.
‘‘(3) ELIGIBLE ENTITY.—The term ‘eligible en-
tity’ means—
‘‘(A) an issuer; or
‘‘(B) a trust, corporation, partnership, or
other entity engaged exclusively in the business
of acquiring and transferring eligible assets di-
rectly or indirectly to an issuer and taking ac-
tions ancillary thereto;
‘‘(4) ISSUER.—The term ‘issuer’ means a trust,
corporation, partnership, or other entity engaged ex-
clusively in the business of acquiring and holding eli-
gible assets, issuing securities backed by eligible as-
sets, and taking actions ancillary thereto.
‘‘(5) TRANSFERRED.—The term ‘transferred’
means the debtor, pursuant to a written agreement,
represented and warranted that eligible assets were
sold, contributed, or otherwise conveyed with the in-
tention of removing them from the estate of the
debtor pursuant to subsection (b)(5), 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
servicing 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. 13. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection
Act of 1971 (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, neither the filing of an application
under subsection (a)(3) nor any order or
decree obtained by Securities Investor Pro-
tection Corporation from the court shall
operate as a stay of any contractual rights
ciation, or a securities clearing agency, a
right set forth in a bylaw of a clearing or-
ganization or contract market or in a reso-
lution 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.’’.
SEC. 14. FEDERAL RESERVE COLLATERAL REQUIREMENTS.
The 2d sentence of the 2d undesignated paragraph
of section 16 of the Federal Reserve Act (12 U.S.C. 412)
is amended by striking ‘‘acceptances acquired under sec-
tion 13 of this Act’’ and inserting ‘‘acceptances acquired
under section 10A, 10B, 13, or 13A of this Act’’.
SEC. 15. SEVERABILITY; EFFECTIVE DATE; APPLICATION
OF AMENDMENTS.
(a) SEVERABILITY.—If any provision of this Act or
any amendment made by this Act, or the application of
any such provision or amendment to any person or cir-
cumstance, is held to be unconstitutional, the remaining
provisions of and amendments made by this Act and the
application of such other provisions and amendments to
any person or circumstance shall not be affected thereby.
(b) EFFECTIVE DATE.—This Act shall take effect on
the date of the enactment of this Act.
(c) APPLICATION OF AMENDMENTS.—The amend-
ments made by this Act shall apply with respect to cases
commenced or appointments made under any Federal or
State law after the date of enactment of this Act, but shall
not apply with respect to cases commenced or appoint-
ments made under any Federal or State law before the
date of enactment of this Act.
Æ