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Tuesday, November 5, 2013

International Regulators Call for Uniform Derivatives Contracts Language

The FDIC, together with the Bank of England, the German Federal Financial Supervisory Authority (BaFin) and the Swiss Financial Market Supervisory Authority (FINMA), have authored a joint letter to encourage the International Swaps and Derivatives Association, Inc. (ISDA) to adopt language in derivatives contracts to delay the early termination of those instruments in the event of the resolution of a global systemically important financial institution (G-SIFI).

In the letter, the resolution authorities express support for the adoption of changes to ISDA's standard documentation to provide for short-term suspension of early termination rights and other remedies in the event of a G-SIFI resolution. The adoption of such changes would allow derivatives contracts to remain in effect throughout the resolution process following the implementation of a number of potential resolution strategies.

By minimizing the disorderly unwinding of such contracts, these changes would place resolution authorities in a better position to resolve G-SIFIs in a manner that promotes financial stability while providing market certainty and transparency.

Read the letter.

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