I
104TH CONGRESS
1ST SESSION
H. R. 31
To enhance the supervision and regulation of the derivatives activities of
financial institutions, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
JANUARY 4, 1995
Mr. GONZALEZ (for himself, Mr. KANJORSKI, and Mr. MFUME) introduced the
following bill; which was referred to the Committee on Banking and Fi-
nancial Services
A BILL
To enhance the supervision and regulation of the derivatives
activities of financial institutions, 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; TABLE OF CONTENTS.
(a) SHORT TITLE.—This Act may be cited as the
‘‘Derivatives Safety and Soundness Supervision Act of
1995’’.
(b) TABLE OF CONTENTS.—
Sec. 1. Short title; table of contents.
Sec. 2. Definitions.
TITLE I—ENHANCED SUPERVISION OF DERIVATIVES ACTIVITIES
Sec. 101. Increased agency oversight of financial institution activities involving
derivative financial instruments.
Sec. 102. Disclosure of amounts, nature, and terms of derivative financial in-
struments in financial institution call reports.
Sec. 103. Training for examiners and assistant examiners.
Sec. 104. State liaisons.
TITLE II—SUPERVISORY IMPROVEMENTS
Sec. 201. Unsafe or unsound practices.
Sec. 202. Confidential emergency management reporting.
Sec. 203. Internal controls.
Sec. 204. Foreign bank supervision.
TITLE III—FINANCIAL INSTITUTION INSOLVENCY REFORMS
Sec. 301. Treatment of certain swap agreements by conservators or receivers of
insured depository institutions.
Sec. 302. Authority of the corporation with respect to failed and failing institu-
tions.
Sec. 303. Amendments relating to transfers of qualified financial contracts.
Sec. 304. Clarifying amendment relating to master agreements.
Sec. 305. Technical amendments relating to qualified financial contracts.
TITLE IV—INTERNATIONAL REGULATORY COOPERATION
Sec. 401. Study of international regulation and supervision of derivatives activi-
ties of financial institutions.
Sec. 402. International negotiations.
TITLE V—GAO STUDY
Sec. 501. Study of speculation and margin and collateral requirements with re-
spect to derivatives activities of financial institutions.
SEC. 2. DEFINITIONS.
For purposes of this Act the following definitions
shall apply:
(1) ACTIVE END-USER.—The term ‘‘active end-
user’’ means any financial institution which buys or
sells a significant amount of derivative financial in-
struments, or conducts transactions in a wide variety
of derivative financial instruments.
(2) APPROPRIATE
FEDERAL
BANKING
AGEN-
CY.—The term ‘‘appropriate Federal banking agen-
cy’’ has the same meaning as in section 3(q) of the
Federal Deposit Insurance Act.
(3) 
APPROPRIATE
FEDERAL
REGULATORY
AGENCY.—The term ‘‘appropriate Federal regulatory
agency’’ means—
(A) any appropriate Federal banking agen-
cy, in the case of any insured depository institu-
tion or other entity described in section 3(q) of
the Federal Deposit Insurance Act;
(B) the National Credit Union Administra-
tion, in the case of any insured credit union;
(C) the Office of Federal Housing Enter-
prise Oversight of the Department of Housing
and Urban Development, in the case of any fi-
nancial institution which is subject to the over-
sight of such office;
(D) the Federal Housing Finance Board,
in the case of any Federal home loan bank or
the Office of Finance of the Federal home loan
banks;
(E) the Director of the Office of Thrift Su-
pervision, in the case of any affiliate of any sav-
ings association or savings and loan holding
company for which there is no other appro-
priate Federal banking agency;
(F) the Securities and Exchange Commis-
sion, in the case of any financial institution de-
scribed in clause (v), (vi), or (vii) of paragraph
(7)(A);
(G) the Secretary of the Treasury, in the
case of any insurance company;
(H) the Commodity Futures Trading Com-
mission, in the case of any financial institution
described in clause (viii) of paragraph (7)(A);
and
(I) the Board of Governors of the Federal
Reserve System, in the case of any financial in-
stitution which is not described in any other
subparagraph of this paragraph.
(4) DEPOSITORY INSTITUTION.—The term ‘‘de-
pository institution’’—
(A) has the same meaning as in section
3(c) of the Federal Deposit Insurance Act; and
(B) includes any Federal credit union and
any State credit union (as such terms are de-
fined in section 101 of the Federal Credit
Union Act).
(5) DERIVATIVES ACTIVITIES.—The term ‘‘de-
rivatives activities’’ means any activity in which a fi-
nancial institution is engaged as a dealer in deriva-
tive financial instruments or as an active end-user.
(6) DERIVATIVE
FINANCIAL
INSTRUMENT.—
The term ‘‘derivative financial instrument’’ means
any qualified financial contract (as defined in section
11(e)(8)(D) of the Federal Deposit Insurance Act),
and any other instrument, which the appropriate
Federal regulatory agency determines to be a deriva-
tive financial instrument.
(7) FINANCIAL
INSTITUTION.—The term ‘‘fi-
nancial institution’’—
(A) means—
(i) any depository institution;
(ii) any entity described in section
3(q) of the Federal Deposit Insurance Act
which is not a depository institution;
(iii) any institution which is subject to
the oversight of the Office of Federal
Housing Enterprise Oversight of the De-
partment of Housing and Urban Develop-
ment; and
(iv) any Federal home loan bank and
the Office of Finance of the Federal home
loan banks;
(v) any broker, dealer, government se-
curities broker, government securities deal-
er, municipal securities broker, or munici-
pal securities dealer (as such terms are de-
fined in the Securities Exchange Act of
1934);
(vi) any investment company (as de-
fined in section 3(a) of the Investment
Company Act of 1940);
(vii) any investment adviser (as de-
fined in section 202(a)(11) of the Invest-
ment Advisers Act of 1940);
(viii) any futures commission mer-
chant, floor broker, commodity trading ad-
visor, or commodity pool operator (as de-
fined in section 1a of the Commodity Ex-
change Act); and
(ix) any insurance company; and
(B) includes any affiliate of a depository
institution (which is not otherwise described in
subparagraph (A)) the derivatives activities of
which are determined by the appropriate Fed-
eral regulatory agency to pose a potential risk
to the safety and soundness of such depository
institution.
banking agencies of financial institutions which
engage in derivatives activities.
(D) The prudent use of collateral by
counterparties to derivatives transactions.
(E) Appropriate parameters, models, and
simulations for the purpose of evaluating a fi-
nancial institution’s exposure to derivatives ac-
tivities and relevant economic scenarios and fur-
ther specifics regarding stress tests.
(F) Appropriate credit risk reserves in con-
nection with derivatives activities.
(G) Protection against legal risk, including
foreign legal risk.
(H) Assurance that, consistent with safe
and sound banking practices, a financial insti-
tution does not recommend or engage in deriva-
tives activities which are inappropriate for a
customer of the institution.
(I) Effective senior management super-
vision and oversight by the board of directors of
a financial institution to ensure that derivatives
activities are conducted in a safe and sound
manner and are consistent with the board of di-
rector’s overall risk management philosophy
and the institution’s business strategy.
(2) REPORTS TO BANKING COMMITTEES.—Dur-
ing the 5-year period beginning on the date of the
enactment of this Act, section 37(c) of the Federal
Deposit Insurance Act shall apply with respect to
the standards adopted, prescribed, or issued by any
appropriate Federal regulatory agency pursuant to
this Act in the same manner such section applies
with respect to accounting and capital standards
used by appropriate Federal banking agencies.
(c) COORDINATION WITH SECTION 37 OF THE FED-
ERAL DEPOSIT INSURANCE ACT.—No provision of this
section shall be construed as authorizing the establishment
of any standard which is inconsistent with the require-
ments of section 37 of the Federal Deposit Insurance Act.
SEC. 102. DISCLOSURE OF AMOUNTS, NATURE, AND TERMS
OF DERIVATIVE FINANCIAL INSTRUMENTS IN
FINANCIAL INSTITUTION CALL REPORTS.
(a) INSURED DEPOSITORY INSTITUTIONS.—The Fed-
eral Deposit Insurance Act (12 U.S.C. 1811 et seq.) is
amended by adding at the end the following new section:
‘‘SEC. 44. DISCLOSURE REQUIREMENTS FOR DERIVATIVE
FINANCIAL INSTRUMENTS.
‘‘(a) INFORMATION REQUIRED TO BE INCLUDED IN
CALL
REPORTS.—Each appropriate Federal banking
agency shall consider, and may require, disclosures in any
report of condition made by any insured depository insti-
tution in accordance with section 7(a) with respect to any
period beginning after December 31, 1995, of the follow-
ing information:
‘‘(1) QUANTITATIVE
INFORMATION
WITH
RE-
SPECT
TO
ALL
DERIVATIVE
FINANCIAL
INSTRU-
MENTS.—
‘‘(A) GROSS NOTIONAL VALUE.—The gross
notional value of each class of derivative finan-
cial instruments.
‘‘(B) REVENUE, GAINS, AND LOSSES.—All
revenue, gains, and losses of the institution at-
tributable to each class of derivative financial
instruments.
‘‘(C) EXPOSURE UNDER BILATERAL NET-
TING CONTRACT.—The net current credit expo-
sure of the institution under legally enforceable
bilateral arrangements with respect to each
class of derivative financial instruments.
‘‘(2) TERMS
TO
MATURITY.—Information on
the remaining term to maturity of each class of de-
rivative financial instruments.
‘‘(3) QUANTITATIVE
INFORMATION
WITH
RE-
SPECT
TO
DERIVATIVE
FINANCIAL
INSTRUMENTS
HELD FOR TRADING PURPOSES.—
‘‘(A) AVERAGE FAIR VALUE BALANCES.—
The average maximum and minimum fair value
balances of the insured depository institution
with respect to each class of derivative financial
instruments used by the institution for trading
purposes.
‘‘(B) REVENUE, GAINS, AND LOSSES.—All
revenue, gains, and losses of the institution at-
tributable to trading account operations with
respect to each class of derivative financial in-
struments.
‘‘(4) ADDITIONAL
INFORMATION.—Any addi-
tional information that any appropriate Federal
banking agency may consider to be appropriate.
‘‘(b) SEPARATE REPORTING FOR EXCHANGE AND
OTC TRADING.—To the maximum extent possible, infor-
mation reported pursuant to subsection (a) with respect
to transactions which are conducted on an exchange, and
each class of derivative financial instruments which are
the subjects of such transactions, shall be provided sepa-
rately from information relating to transactions which are
conducted over the counter, and the classes of derivative
financial instruments which are the subjects of such trans-
actions.
‘‘(c) QUALITATIVE REPORTING REQUIREMENTS.—
The Federal banking agencies shall take such action as
may be appropriate to encourage insured depository insti-
tutions to publicly report the following information with
such frequency as the agencies determine to be appro-
priate:
‘‘(1) NATURE OF DERIVATIVE FINANCIAL IN-
STRUMENTS.—A description of—
‘‘(A) the purposes for which each class of
derivative financial instruments has been ac-
quired by the institution, including the specific
objectives of the institution; and
‘‘(B) the overall operating and investment
strategies of the institution which provide the
context for acquiring or taking any such hold-
ing, position, or other interest in any derivative
financial instrument.
‘‘(2) ACCOUNTING POLICIES.—A description of
the accounting policy and principles and the meth-
odologies used by the institution to determine the
value of the various classes of derivative financial in-
struments.
‘‘(d) DEFINITIONS.—For purposes of this section, the
terms ‘active end-user’ and ‘derivative financial instru-
ment’ have the same meanings as in section 2 of the De-
rivatives Safety and Soundness Supervision Act of 1995.’’.
(b) INSURED CREDIT UNIONS.—Section 202(a) of
the Federal Credit Union Act (12 U.S.C. 1782(a)) is
amended by adding at the end the following new para-
graph:
‘‘(8) DERIVATIVE FINANCIAL INSTRUMENTS.—
‘‘(A) IN GENERAL.—The reports of condi-
tion made by insured credit unions under this
section shall include all the information with re-
spect to derivative financial instruments which
is required, under section 44 of the Federal De-
posit Insurance Act, to be included in reports of
condition made by insured depository institu-
tions (as defined in section 3 of such Act).
‘‘(B) APPLICABILITY
OF
SECTION
OF
THE FEDERAL DEPOSIT INSURANCE ACT.—Sec-
tion 44 of the Federal Deposit Insurance Act
shall apply with respect to insured credit unions
and the Board in the same manner such section
applies to insured depository institutions and
Federal banking agencies (as such terms are
defined in section 3 of such Act) and shall be
enforceable by the Board with respect to in-
sured credit unions under this Act.’’.
(c) OTHER FINANCIAL INSTITUTIONS.—
(1) IN
GENERAL.—Each appropriate Federal
regulatory agency of any financial institution which
is not an insured depository institution or an insured
credit union shall consider requiring, and may re-
quire, such institution to file a quarterly report, with
such institution’s appropriate Federal regulatory
agency, containing comparable information with re-
spect to derivative financial instruments which is re-
quired, under section 44 of the Federal Deposit In-
surance Act, to be included in reports of condition
made by insured depository institutions (as defined
in section 3 of such Act).
(2) APPLICABILITY
OF
SECTION
OF
THE
FEDERAL DEPOSIT INSURANCE ACT.—Section 44 of
the Federal Deposit Insurance Act shall apply with
respect to financial institutions and appropriate
Federal regulatory agencies described in paragraph
(1) in the same manner such section applies to in-
sured depository institutions and Federal banking
agencies (as such terms are defined in section 3 of
such Act) and shall be enforceable by such agencies
with respect to such financial institutions under any
other law which provides such agency with adminis-
trative enforcement authority over such institution.
SEC. 103. TRAINING FOR EXAMINERS AND ASSISTANT EX-
AMINERS.
(a) IN GENERAL.—The Financial Institutions Exam-
ination Council shall sponsor training programs concern-
ing derivatives activities for examiners and assistant ex-
aminers employed by any agency represented on such
council.
(b) ENROLLMENT.—Under such conditions as the Fi-
nancial Institutions Examination Council may establish,
training programs sponsored by the council pursuant to
subsection (a) shall be open to enrollment by employees
of State bank supervisors (as defined in section 3(r) of
the Federal Deposit Insurance Act) and employees of the
Federal Housing Finance Board and the Office of Federal
Housing Enterprise Oversight of the Department of Hous-
ing and Urban Development.
(c) RISK MANAGEMENT TRAINING.—The risk man-
agement training provided under section 1009A of the
Federal Financial Institutions Examination Council Act of
1978 shall include risk management techniques related to
derivatives activities, except that the cost of providing
training with respect to such activities to employees of fi-
nancial institutions shall be paid by the institutions.
SEC. 104. STATE LIAISONS.
(a) IN GENERAL.—To encourage the application of
uniform examination principles and standards by State
and Federal agencies with respect to derivatives activities
of financial institutions, the appropriate Federal regu-
latory agencies shall establish a liaison committee com-
posed of 5 representatives of State agencies which super-
vise financial institutions which shall meet at least twice
a year with such Federal agencies.
(b) TRAVEL EXPENSES.—Each member of the liaison
committee established pursuant to subsection (a) shall re-
ceive travel expenses, including per diem in lieu of subsist-
ence, in accordance with sections 5702 and 5703 of title
5, United States Code.
TITLE II—SUPERVISORY
IMPROVEMENTS
SEC. 201. UNSAFE OR UNSOUND PRACTICES.
(a) EFFECTIVE MANAGEMENT OVERSIGHT.—No fi-
nancial institution may engage in derivatives activities
without a written management plan approved by the board
of directors of the institution which—
(1) ensures that such activities are—
(A) conducted with appropriate oversight
of the directors and the senior executive officers
(as defined pursuant to section 32(f) of the
Federal Deposit Insurance Act) of the institu-
tion;
(B) conducted in a safe and sound man-
ner; and
(C) consistent with the overall risk man-
agement philosophy and the business strategy
of the management of the institution; and
(2) establishes prudential standards for the
management of the risks involved in such activities
and a framework for internal controls with respect
to such activities.
(b) REQUIREMENT FOR DIRECTORS.—No financial
institution may act as a dealer in derivative financial in-
struments or as an active end-user unless the board of
directors of such institution is informed of the risks associ-
ated with the derivatives activities of the financial institu-
tion and the total current credit exposure of the institution
with respect to any such activities.
(c) ENFORCEMENT.—Any failure to comply with the
provisions of this section, and the failure of any institu-
tion-affiliated party (as defined in section 3(u) of the Fed-
eral Deposit Insurance Act) engaged in derivatives activi-
ties to have adequate technical expertise with respect to
such activities, may be treated by the appropriate Federal
regulatory agency as an unsafe or unsound practice in
conducting the business of the institution involved.
SEC. 202. CONFIDENTIAL EMERGENCY MANAGEMENT RE-
PORTING.
(a) IN GENERAL.—Before the end of the 1-year pe-
riod beginning on the date of the enactment of this Act,
the appropriate Federal regulatory agencies shall develop
the means to obtain all necessary information relating to
any derivatives activity or any class of derivative financial
instruments, whenever the appropriate Federal regulatory
agency determines such information is needed, from any
financial institution which is a dealer in derivative finan-
cial instruments or is an active end-user if the agency de-
termines that the agency needs such information as a re-
sult of adverse market conditions or other emergency situ-
ation (as defined by the agency).
(b) ACCESSIBILITY OF INFORMATION.—Each finan-
cial institution referred to in subsection (a) shall—
(1) obtain such information and make and keep
such records as the appropriate Federal regulatory
agency may require by regulation for purposes of
such paragraph; and
(2) promptly provide to the appropriate Federal
regulatory agency any information requested by the
agency pursuant to such paragraph.
(c) 
CONFIDENTIALITY
OF
INFORMATION
PRO-
VIDED.—No information provided to or obtained by an ap-
propriate Federal regulatory agency pursuant to sub-
section (a) with respect to any financial institution may
be provided to any person or entity other than another
Federal regulatory agency with jurisdiction over the finan-
cial institution without the prior written approval of the
agency.
SEC. 203. INTERNAL CONTROLS.
Section 39(a)(1)(A) of the Federal Deposit Insurance
Act (12 U.S.C. 1831p–1(a)(1)(A)) is amended by striking
‘‘internal controls’’ and inserting ‘‘internal controls (in-
cluding internal controls for activities involving derivative
financial instruments (as defined in section 44(d)))’’.
SEC. 204. FOREIGN BANK SUPERVISION.
(a) STANDARDS FOR APPROVAL.—Section 7(d)(2)(A)
of the International Banking Act of 1978 (12 U.S.C.
3105(d)(2)(A)) is amended by inserting before the semi-
colon the following: ‘‘, including, in the case of a foreign
bank engaged in derivatives activities (as defined in sec-
tion 2(5) of the Derivatives Safety and Soundness Super-
vision Act of 1995), comprehensive supervision and regu-
lation of such activities.’’.
(b) FACTOR FOR CONSIDERATION.—Section 7(d) of
the International Banking Act of 1978 (12 U.S.C.
3105(d)) is amended by adding at the end the following
new paragraph:
‘‘(6) FACTOR FOR CONSIDERATION.—In making
any determination under paragraph (2), the Board
shall consider whether the home country of a foreign
bank maintains comprehensive supervision and regu-
lation of derivatives activities (as defined in section
2(5) of the Derivatives Safety and Soundness Super-
vision Act of 1995), including, where appropriate,
capital and disclosure standards, which are not less
stringent than United States standards.’’.
TITLE III—FINANCIAL INSTITU-
TION INSOLVENCY REFORMS
SEC. 301. TREATMENT OF CERTAIN SWAP AGREEMENTS BY
CONSERVATORS OR RECEIVERS OF INSURED
DEPOSITORY INSTITUTIONS.
Section 11(e)(8)(D)(vi)(I) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)(D)(vi)(I)) is amend-
ed—
(1) by striking ‘‘purchased’’ each place such
term appears; and
(2) by inserting ‘‘, equity derivative, equity or
equity index swap, equity or equity index option,
bond option, spot foreign exchange transaction’’
after ‘‘currency option’’.
SEC. 302. AUTHORITY OF THE CORPORATION WITH RE-
SPECT TO FAILED AND FAILING INSTITU-
TIONS.
Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (E)—
(A) by striking ‘‘paragraph (12) of this
subsection’’; and
(B) by striking ‘‘subsection (d)(9)’’ and in-
serting 
‘‘subsections 
(d)(9), 
(e)(10), 
and
(n)(4)(I)’’; and
(2) by adding the following new subparagraphs:
‘‘(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) or to
liquidate any such contract.
‘‘(G) UNDERCAPITALIZED
INSURED
DE-
POSITORY INSTITUTIONS.—The Corporation, in
consultation with the appropriate Federal bank-
ing agencies, shall prescribe regulations requir-
ing more detailed recordkeeping with respect to
qualified financial contracts (including market
valuations) by insured depository institutions
that are undercapitalized (as defined in section
38).’’.
SEC. 303. AMENDMENTS RELATING TO TRANSFERS OF
QUALIFIED FINANCIAL CONTRACTS.
Section 11(e)(10) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(10)) is amended—
(1) in subparagraph (A)—
(A) by striking ‘‘conservator or’’ each place
such term appears’’;
(B) by striking ‘‘use such conservator’s or
receiver’s best efforts to’’; and
(C) by striking ‘‘12:00, noon (local time)’’
and inserting ‘‘5:00 p.m. (Eastern time)’’;
(2) by redesignating subparagraph (B) as sub-
paragraph (E); and
(3) by inserting after subparagraph (A) the fol-
lowing new subparagraphs:
‘‘(B) CERTAIN
RIGHTS
NOT
ENFORCE-
ABLE.—
‘‘(i) IN GENERAL.—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 net
or close out such contract under paragraph
(8)(A) or section 403 or 404 of the Fed-
eral Deposit Insurance Corporation Im-
provement Act of 1991 solely by reason of
the appointment of a receiver for the de-
pository institution (or the insolvency or fi-
nancial condition of the institution for
which the receiver is been appointed) until
the earlier of—
‘‘(I) 5:00 p.m. (Eastern time) of
the business day following the date of
the appointment of the receiver; or
‘‘(II) the time the person receives
notice that the contract has been
transferred pursuant to paragraph
(9)(A).
‘‘(ii) NOTICE
TO
LAST-KNOWN
AD-
DRESS.—For purposes of this subpara-
graph, the Corporation as receiver of an
insured depository institution shall be
deemed to have notified a person who is a
party to a qualified financial contract with
such depository institution if the Corpora-
tion has sent notice to the last address of
such person shown on the books and
records of the depository institution with
respect to such contract in the manner
provided for in the contract or by other
means reasonably calculated to reach such
person by the time specified in clause
(i)(I).
‘‘(iii) EXCEPTION TO RIGHT OF CON-
TRACTING PARTY TO NET OR CLOSE OUT
CONTRACTS.—A person who is a party to
a qualified financial contract with an in-
sured depository institution may not exer-
cise any right such person has to net or
close out a contract under paragraph
(8)(E) or section 403 or 404 of Federal
Deposit Insurance Corporation Improve-
ment Act of 1991, solely by reason of the
appointment of a conservator for the de-
pository institution.
‘‘(C) TREATMENT OF BRIDGE BANKS.—A
bridge bank shall not be treated as a depository
institution in default for purposes of this para-
graph.
‘‘(D) 
TREATMENT
OF
CERTAIN
CONSERVATORSHIPS.—An institution organized
by the Corporation for which a conservator is
appointed—
‘‘(i) immediately upon the organiza-
tion of the institution; or
‘‘(ii) at the time of a purchase and as-
sumption transaction between such institu-
tion and a failed depository institution for
which the Corporation has been appointed
receiver,
shall not be treated as a depository institution
in default for purposes of this paragraph.’’.
SEC. 304. 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, together with all sup-
plements to such master agreement, shall
be treated as a single agreement and a sin-
gle qualified financial contract.’’.
SEC. 305. TECHNICAL AMENDMENTS RELATING TO QUALI-
FIED FINANCIAL CONTRACTS.
(a) DEFINITION
OF QUALIFIED FINANCIAL CON-
TRACT.—Section 11(e)(8)(D) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(8)(D)) is amended—
(1) in clause (i), by inserting ‘‘spot contract,’’
after ‘‘swap agreement,’’;
(2) in clause (iv), by striking ‘‘(24)’’ and insert-
ing ‘‘(25)’’; and
(3) in clause (v), by striking ‘‘101(41)’’ and in-
serting ‘‘101(47)’’.
(b) LIMITATION ON RIGHTS OF COUNTERPARTIES IN
EVENT OF DEFAULT DUE TO APPOINTMENT OF A CON-
SERVATOR.—Section 11(e)(8)(E)(i) of the Federal De-
posit Insurance Act (12 U.S.C. 1821(e)(8)(E)(i)) is
amended—
(1) by striking ‘‘paragraph (12)’’ and inserting
‘‘paragraph (10)’’; and
(2) by striking ‘‘subsection (d)(9)’’ and insert-
ing ‘‘subsections (d)(9) and (n)(4)(I)’’.
(c) FEDERAL DEPOSIT INSURANCE CORPORATION
IMPROVEMENT
ACT
OF
1991.—Sections 403(a) and
404(a) of the Federal Deposit Insurance Corporation Im-
provement Act of 1991 (12 U.S.C. 4403(a), 4404(a)) are
each amended by inserting ‘‘other than paragraph (8)(E)
and (10)(B)(iii) of section 11(e) of the Federal Deposit
Insurance Act’’ after ‘‘other provisions of law’’.
TITLE IV—INTERNATIONAL
REGULATORY COOPERATION
SEC. 401. STUDY OF INTERNATIONAL REGULATION AND SU-
PERVISION OF DERIVATIVES ACTIVITIES OF
FINANCIAL INSTITUTIONS.
(a) IN GENERAL.—Before the end of the 30-day pe-
riod beginning on the date of the enactment of this Act,
the Secretary of the Treasury shall request a meeting with
the appropriate representatives of the other major indus-
trialized countries to plan a study to examine the adequacy
of the international regulation and supervision of deriva-
tives activities of financial institutions.
(b) GOALS OF STUDY.—The goals of the study as
proposed by the Secretary of the Treasury pursuant to
subsection (a) with respect to derivatives activities of fi-
nancial institutions shall be as follows:
(1) To foster a greater understanding of the
manner in which derivative financial instruments af-
fect the stability of the world’s financial systems and
markets.
(2) To examine the adequacy of international
regulation and supervision of derivative financial ac-
tivities.
(3) To make recommendations for improving
the international regulation and supervision of deriv-
ative financial activities.
(4) To foster greater cooperation between all
regulatory agencies with jurisdiction over derivatives
activities.
(5) To make recommendations for action by the
financial regulators in the respective countries that
would facilitate the safe and sound conduct of enti-
ties involved in derivative financial activities.
(6) To evaluate the feasibility of establishing a
single governing body to regulate international deriv-
ative financial activities.
(c) ISSUES TO STUDY.—The Secretary of the Treas-
ury shall propose that the study with respect to derivatives
activities of financial institutions include the following
factors:
(1) Identification of the manner in which deriv-
ative financial instruments affect the stability of the
world’s financial systems and markets.
(2) Identification of the various regulatory enti-
ties and mechanisms that are used to regulate and
supervise derivative financial activities around the
world.
(3) Analysis of the adequacy of the cooperation
between the various regulatory entities and mecha-
nisms referred to in paragraph (2).
(4) Identification of problems that inhibit the
safe and sound conduct of worldwide derivatives ac-
tivities.
(5) Analysis of the extent to which derivative fi-
nancial activities in countries other than the major
industrialized countries affect the safety and sound-
ness of the world’s financial systems and markets.
(6) Identification of uniform accounting and
public reporting standards for derivative financial in-
struments.
(7) Evaluation of the feasibility of establishing
a single governing body to regulate international de-
rivatives activities.
(d) UTILIZATION
OF
INFORMATION
AND
RE-
SOURCES.—The Secretary of the Treasury shall propose
that, in conducting the study under this section with re-
spect to derivatives activities of financial institutions, the
major industrialized countries should—
(1) gather information from a wide variety of
sources including government agencies, central
banks, market participants, and the consumers of
the derivative financial instruments;
(2) to the extent feasible, obtain and use infor-
mation from the International Monetary Fund, the
Bank for International Settlements, and other multi-
lateral organizations; and
(3) utilize all available information and conclu-
sions from studies conducted by any multilateral or-
ganization, central bank, or any group consisting of
representatives of major industrialized countries.
SEC. 402. INTERNATIONAL NEGOTIATIONS.
The Chairman of the Board of Governors of the Fed-
eral Reserve System and the Comptroller of the Currency
shall encourage central banks, and regulatory authorities
of the other industrialized countries to work toward main-
taining and, where appropriate, adopting comparable su-
pervisory standards and regulations, particularly capital
standards, for financial institutions engaged in derivatives
activities.
TITLE V—GAO STUDY
SEC. 501. STUDY OF SPECULATION AND MARGIN AND COL-
LATERAL REQUIREMENTS WITH RESPECT TO
DERIVATIVES ACTIVITIES OF FINANCIAL IN-
STITUTIONS.
(a) STUDY REQUIRED.—
(1) IN GENERAL.—The Comptroller General of
the United States shall conduct a study of the spec-
ulative uses of derivative financial instruments by fi-
nancial institutions and the feasibility of imposing
margin and collateral requirements on speculative
transactions engaged in by financial institutions
which involve derivative financial instruments.
(2) REPORT.—The Comptroller General shall
submit a report on the study conducted pursuant to
paragraph (1) to the Congress before the end of the
18-month period beginning on the date of the enact-
ment of this Act.
(b) ISSUES INVOLVING SPECULATIVE TRANSACTIONS
INVOLVING DERIVATIVE FINANCIAL INSTRUMENTS.—In
conducting the study under subsection (a)(1), the Comp-
troller General shall—
(1) define the term ‘‘speculation’’ as such term
is used in connection with derivative financial instru-
ments;
(2) determine the extent to which financial in-
stitutions use the various classes of derivative finan-
cial instruments to engage in speculation for the in-
stitution’s own trading account; and
(3) determine the extent to which financial in-
stitutions engage in derivatives activities involving
the various classes of derivative financial instru-
ments with speculators.
(c) ISSUES INVOLVING MARGIN AND COLLATERAL
REQUIREMENTS.—In conducting the study under sub-
section (a)(1), the Comptroller General shall—
(1) determine which classes of derivative finan-
cial instruments are subject to margin and collateral
requirements and the amount and purpose of the
margin and collateral requirement;
(2) determine the extent to which the trans-
actions of financial institutions which involve any
class of derivative financial instruments are con-
ducted over the counter and evaluate the feasibility
of imposing margin and collateral requirements on
such transactions;
(3) evaluate the feasibility of imposing margin
and collateral requirements on any class of deriva-
tive financial instruments which were acquired or
taken for speculative purposes; and
(4) evaluate the competitive impact of imposing
margin and collateral requirements on the various
classes of derivative financial instruments which
were acquired or taken for speculative purposes.
Æ
HR 31 IH——2
HR 31 IH——3