I
105TH CONGRESS
2D SESSION
H. R. 4239
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
JULY 16, 1998
Mr. LEACH (for himself, Mr. LAFALCE, Mr. MCCOLLUM, and Mrs. ROUKEMA)
introduced the following bill; which was referred to the Committee on
Banking and Financial Services, and in addition to the Committees on
the Judiciary, and Commerce, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as fall
within the jurisdiction of the committee concerned
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 (15 U.S.C. 78c(a)(41)) or
interest therein, including an option
for the purchase or sale of a security,
certificate of deposit, or group or
index of securities (including any in-
terest therein or based on the value
thereof) or any option entered into on
a national securities exchange relating
to foreign currencies, or the guarantee
of any settlement 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; and
‘‘(III) does not include an agree-
ment that provides for the transfer of
securities against the transfer of
funds by the transferee of such securi-
ties with a simultaneous agreement by
such transferee to transfer to the
transferor thereof securities against
the transfer of funds; provided, how-
ever, the exclusion contained in this
subparagraph does not apply to any
such agreement for the transfer of the
types of securities referred to in sec-
tion 1821(e)(8)(D)(v) against funds
so long as the simultaneous agreement
provides for the transfer of funds
against such securities within 1 year
of the transfer of such securities.’’.
(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’ has the mean-
ing given to such term in section 761(4) of
title 11, United States Code, or any other
similar agreement.’’.
(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 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 fu-
ture becomes the subject of dealing in the
forward contract trade, or product or by-
product thereof, with a maturity date more
than 2 days after the date the contract is
entered into, including, but not limited to,
a repurchase agreement, consignment,
lease, swap, hedge transaction, deposit,
loan, 
option, 
allocated 
transaction,
unallocated transaction, or any combina-
tion thereof or option thereon, or any other
similar agreement.’’.
(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
(15 U.S.C. 78c(a)(41)), any mortgage
loan, and any interest in any mort-
gage loan, eligible bankers’ accept-
ances, qualified foreign government
securities or securities that are direct
obligations of, or that are fully guar-
anteed 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 cer-
tificates of deposit, eligible bankers’
acceptances, or securities with a si-
multaneous agreement by such trans-
feree to transfer to the transferor
thereof certificates of deposit, mort-
gage-related securities, and mortgage
loan, and any interest in any mort-
gage loan, eligible bankers’ accept-
ances, 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; and
‘‘(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.
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’—
‘‘(I) means any agreement, in-
cluding the terms and conditions in-
corporated by reference in any such
agreement, which is an interest rate
swap, option, future, or forward
agreement, including a rate floor, rate
cap, rate collar, cross-currency rate
swap, and basis swap; a spot, same
day-tomorrow, tomorrow-next, forward
or other foreign exchange agreement;
a currency swap, option, future, or
forward agreement; an equity index or
equity swap, option, future, or for-
ward agreement; a debt index or debt
swap, option, future, or forward
agreement; a credit swap, option, fu-
ture, or forward agreement; a com-
modity swap, option, future, or for-
ward agreement or any other similar
agreement;
‘‘(II) means any combination of
such agreements and any option to
enter into any such agreement;
‘‘(III) does not include any trans-
action, no matter how documented,
that is in substance a commercial,
consumer, or industrial loan; and
‘‘(IV) as defined in this clause
shall not be construed or applied to
challenge or affect the characteriza-
tion, definition, or treatment of any
swap agreement or any instrument de-
fined as a swap agreement herein,
under any other statute, regulation, or
rule, including, but not limited to, the
Securities Act of 1933 (15 U.S.C. 77a
et seq.), the Securities Exchange Act
of 1934 (15 U.S.C. 78a et seq.), the
Public Utility Holding Company Act
of 1935 (15 U.S.C. 79a et seq.), the
Trust Indenture Act of 1939 (15
U.S.C. 77aa et seq.), the Investment
Company Act of 1940 (15 U.S.C.
80a–1 et seq.), the Investment Advis-
ers Act of 1940 (15 U.S.C. 80b et
seq.), the Securities Investor Protec-
tion Act of 1970 (15 U.S.C. 78aaa et
seq.), the Commodity Exchange Act
(7 U.S.C. 1 et seq.), and the rules
and regulations promulgated 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) Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)) is amended—
(1) in subparagraph (E), by striking ‘‘other
than paragraph (12) of this subsection, subsection
(d)(9)’’ and inserting ‘‘other than subsections (d)(9)
and (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.—Notwithstanding the provisions of sub-
paragraphs (A) and (E), and sections 403 and
404 of the Federal Deposit Insurance Corpora-
tion Improvement Act of 1991 (12 U.S.C. 4403
and 4404), no walkaway clause shall be enforce-
able in a qualified financial contract of an in-
sured depository institution in default. For pur-
poses of this subparagraph, a ‘walkaway clause’
is 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
parties in accordance with its terms upon termi-
nation, liquidation, or acceleration of the quali-
fied 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) Section 11(e)(12)(A) of the Federal Deposit In-
surance Act (12 U.S.C. 1821(e)(12)(A)) is amended by
inserting ‘‘or the exercise of rights or powers’’ after ‘‘the
appointment’’.
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—
‘‘(I) the business day following
the date of the appointment of the re-
ceiver, in the case of a receivership; or
‘‘(II) the business day following
such transfer in the case of a con-
servatorship.’’.
(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
its rights of disaffirmance or repudiation with re-
spect to any qualified financial contract to which
such institution is a party, the conservator or re-
ceiver 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 (12
U.S.C. 1815);’’; 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 (12 U.S.C. 3101);’’;
(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 (12 U.S.C. 1821(e)) or any order
authorized under section 5(b)(2) of the Securities Investor
Protection Act of 1971 (15 U.S.C. 78eee(b)(2))), the cov-
ered contractual payment obligations and the covered con-
tractual payment entitlements between any 2 financial in-
stitutions shall be netted in accordance with, and subject
to the conditions of, the terms of any applicable 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 (12 U.S.C. 1821(e)) and section
5(b)(2) of the Securities Investor Protection Act of 1971
(15 U.S.C. 78eee(b)(2))).’’.
(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 (12 U.S.C. 1821(e)) and any order
authorized under section 5(b)(2) of the Securities Investor
Protection Act of 1971 (15 U.S.C. 78eee(b)(2))), the cov-
ered contractual payment obligations and the covered con-
tractual 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 sub-
ject to the conditions of any applicable netting 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 (12 U.S.C. 1821(e)) and section
5(b)(2) of the Securities Investor Protection Act of 1971
(15 U.S.C. 78eee(b)(2)).’’.
(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 (12 U.S.C.
1821(e)) shall apply to an uninsured national bank or un-
insured 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 (12 U.S.C. 1821(e)).
‘‘(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 (12 U.S.C. 3101).’’.
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 ‘‘repurchase trans-
action, reverse repurchase transaction’’;
(ii) by inserting ‘‘repurchase agree-
ment’’ after ‘‘but not limited to, a’’; and
(iii) by inserting before the semicolon
‘‘, or any other similar agreement, and a
security agreement or arrangement or
other credit enhancement related to 1 or
more of the foregoing’’;
(B) by amending paragraph (47) to read
as follows:
‘‘(47) ‘repurchase agreement’ (which definition
also applies to a reverse repurchase agreement)—
‘‘(A) means—
‘‘(i) an agreement, including related
terms, which provides for the transfer of
certificates of deposit, eligible bankers’ ac-
ceptances, qualified foreign government se-
curities or securities that are direct obliga-
tions 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 trans-
feree of such certificates of deposit, eligible
bankers’ acceptances, or securities with a
simultaneous agreement by such transferee
to transfer to the transferor thereof certifi-
cates of deposit, eligible bankers’ accept-
ances, or securities 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) a security agreement or arrange-
ment or other credit enhancement related
to 1 or more of the foregoing; and
‘‘(B) does not include any participation in
or servicing agreement for a commercial mort-
gage loan.
For purposes of this paragraph, a ‘qualified foreign gov-
ernment security’ means a security that is a direct obliga-
tion of, or that is fully guaranteed by, the central govern-
ment of a member of the Organization for Economic Co-
operation and Development.’’; and
(C) by amending paragraph (53B) to read
as follows:
‘‘(53B) ‘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-
cluding any interest therein or based on the
value thereof) or any option entered into on a
national securities exchange relating to foreign
currencies, or the guarantee of any settlement
of cash or securities by or to a securities clear-
ing agency, or any other similar agreement; and
‘‘(B) does not include—
‘‘(i) any participation in or servicing
agreement for a commercial mortgage loan;
or
‘‘(ii) an agreement that provides for
the transfer of securities against the trans-
fer of funds by the transferee of such secu-
rities with a simultaneous agreement by
such transferee to transfer to the trans-
feror thereof securities against the transfer
of funds; provided, however, the exclusion
contained in this clause does not apply to
any such agreement for the transfer of the
types of securities referred to in section
101(47) against funds so long as the si-
multaneous agreement provides for the
transfer of funds against such securities
within 1 year of the transfer of such secu-
rities.’’; and
(3) in section 761(4)—
(A) by striking ‘‘or’’ at the end of subpara-
graph (D);
(B) by inserting ‘‘or’’ at the end of sub-
paragraph (E); and
(C) by adding at the end the following new
subparagraph:
‘‘(F) or any other similar agreement, and
a security agreement or arrangement or other
credit enhancement related to 1 or more of the
foregoing;’’.
(b) DEFINITIONS OF FINANCIAL INSTITUTION AND
FORWARD CONTRACT MERCHANT.—Section 101 of title
11, United States Code, is amended—
(1) by amending paragraph (22) to read as fol-
lows:
‘‘(22) ‘financial institution’ means a Federal
Reserve Bank, or a person that is a commercial or
savings bank, industrial savings bank, savings and
loan association, trust company, or receiver or con-
servator for such person and, when any such Federal
Reserve Bank, receiver, or conservator or person act-
ing as agent or custodian for a customer in connec-
tion with a securities contract, as defined in section
741(7) of this title, such customer;’’; and
(2) by amending paragraph (26) to read as fol-
lows:––
‘‘(26) ‘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 commodity,
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 subject of
dealing or in the forward contract trade;’’.
(c) DEFINITION OF MASTER NETTING AGREEMENT
AND MASTER NETTING AGREEMENT PARTICIPANT.—Sec-
tion 101 of title 11, United States Code, is amended by
inserting after paragraph (38) the following new para-
graphs:
‘‘(38A) ‘master netting agreement’ means an
agreement providing for the exercise of rights, in-
cluding rights of netting, setoff, liquidation, termi-
nation, acceleration, or closeout, under or in connec-
tion with 1 or more contracts that are described in
any 1 or more of paragraphs (1) through (5) of sec-
tion 561(a), or any security agreement or arrange-
ment or other credit enhancement related to 1 or
more of the foregoing. If a master netting agreement
contains provisions relating to agreements or trans-
actions that are not contracts described in para-
graphs (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 agree-
ments or transactions that are described in any 1 or
more of the paragraphs (1) through (5) of section
561(a);
‘‘(38B) ‘master netting agreement participant’
means an entity that, at any time before the filing
of the petition, is a party to an outstanding master
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.—Section 362(b)
of title 11, United States Code, is amended—
(1) in paragraph (6), by inserting ‘‘, pledged to,
and under the control of,’’ after ‘‘held by’’;
(2) in paragraph (7), by inserting ‘‘, pledged to,
and under the control of,’’ after ‘‘held by’’;
(3) by amending paragraph (17) to read as fol-
lows:
‘‘(17) under subsection (a), of the setoff by a
swap participant of any mutual debt and claim
under or in connection with any swap agreement
that constitutes 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 par-
ticipant under or in connection with any swap agree-
ment or against cash, securities, or other property of
the debtor held by, pledged to, and under the control
of, or due from such swap participant to guarantee,
secure, or settle any swap agreement;’’;
(4) in paragraph (18), by striking the period
and inserting ‘‘; or’’; and
(5) by inserting after paragraph (18) the fol-
lowing 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 a master
netting agreement to the extent such participant
could offset the claim under paragraph (6), (7), or
(17) for each individual contract covered by the mas-
ter netting agreement in issue.’’.
(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’’;
(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, but is not limited to, a right
set forth in a rule or bylaw of a national securities ex-
change, a national securities association, or a securities
clearing agency, a right set forth in a bylaw of a clearing
organization or contract market or in a resolution of the
governing board thereof, and a right whether or not evi-
denced 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.’’.
(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 III 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’’.
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
disallowed under subsection (d) or (e) of this section
as if such claim had arisen before the date of the fil-
ing of the petition.’’.
SEC. 12. 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 SIPC from the court
shall operate as a stay of any contractual
rights of a creditor to liquidate, terminate,
or accelerate a securities contract, com-
modity contract, forward contract, repur-
chase agreement, swap agreement, or mas-
ter netting agreement, each as defined in
title 11, to offset or net termination values,
payment amounts, or other transfer obliga-
tions arising under or in connection with 1
or more of such contracts or agreements,
or to foreclose on any cash collateral
pledged by the debtor whether or not with
respect to 1 or more of such contracts or
agreements.
‘‘(ii) Notwithstanding clause (i), such
application, order, or decree may operate
as a stay of the foreclosure on securities
collateral pledged by the debtor, whether
or not with respect to 1 or more of such
contracts or agreements, or securities sold
by the debtor under a repurchase agree-
ment.
‘‘(iii) As used in this section, the term
‘contractual right’ includes, but is not lim-
ited to, a right set forth in a rule or bylaw
of a national securities exchange, a na-
tional securities association, or a securities
clearing agency, a right set forth in a
bylaw of a clearing organization or con-
tract market or in a resolution of the gov-
erning 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. 13. 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