Agreement To Amend Certain Qualified Financial Contracts – Tuyuri Karin

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Agreement To Amend Certain Qualified Financial Contracts

2021年4月8日

While some contracts, such as exchange contracts and pension contracts, clearly fall within the definition of a CFQ, the term is broad enough to encompass many types of agreements that are not normally considered derivatives. The ancillary provisions contained in some agreements may lead to them being defined. Among the types of agreements that counterparties are required to carefully consider are multilateral management agreements (which allow transactions from different branches of a company, some of which are not covered companies), investment management agreements, brokerage agreements, deposit agreements, correspondence agreements, collateral agency agreements, guarantee contracts, guarantee contracts, , loyalty agreements, trust agreements and others. The QFC rule modification requirements apply only to CFQs that include one of the following types of provisions (QFC in-scope): end-users who enter into a bilateral amendment agreement individually modify their covered CFQs with each of their participating counterparties with respect to the entities covered, in accordance with the general rules. This gives an end user more flexibility in complying with its rules, but it is much more administratively costly because it requires individual modification agreements to be negotiated and concluded with each of its counterparties for the companies covered. With the implementation of the U.S. Stay Final Rules resolution, end-users must modify some of their derivatives and other financial contracts with global systemically important banking organizations (GSIBs). The manner in which these changes are made, whether it is a branch protocol or a bilateral agreement, can lead to significant differences in the ability of end-users to exercise their insolvent payment rights. U.S. regulators have excluded states and central banks from the application of QFC rules, but have not ruled out. Similarly, multilateral development banks have not been excluded from the application of the QFC rules. As a result, states, central banks and multilateral development banks that have entered into qfC with covered entities must modify these QFCs in accordance with the QFC rules. The QFC rules expressly state that so-called enterprises and multilateral development banks are not “financial counterparties” within the meaning of the rules.

As a result, states, central banks and multilateral development banks have until January 1, 2020 to amend their QFC (as explained below), but have probably received amendments from their insured counterparties sometime in 2019. Since the DL Act and Dodd-Frank Title II allow the FDIC to impose a short stay (usually on a working day) after an institution goes bankrupt, this means that its counterparts will not be able to terminate their FQs with such an institution or exercise other security default rights during that period of stay.

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