[House Report 106-834]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-834
HOUSE OF REPRESENTATIVES
2d Session Part 1
======================================================================
FINANCIAL CONTRACT NETTING IMPROVEMENT ACT OF 2000
_______
September 7, 2000.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Leach, from the Committee on Banking and Financial Services,
submitted the following
R E P O R T
[To accompany H.R. 1161]
[Including cost estimate of the Congressional Budget Office]
The Committee on Banking and Financial Services, to whom was
referred the bill (H.R. 1161) to revise the banking and
bankruptcy insolvency laws with respect to the termination and
netting of financial contracts, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Contract Netting Improvement
Act of 2000''.
SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS OF
INSURED DEPOSITORY INSTITUTIONS.
(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order''
after ``any similar agreement that the Corporation determines by
regulation''.
(b) Definition of Securities Contract.--Section 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 follows:
``(ii) Securities contract.--The term
`securities contract'--
``(I) means a contract for the
purchase, sale, or loan of a security,
a certificate of deposit, a mortgage
loan, or any interest in a mortgage
loan, a 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 any 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) does not include any purchase,
sale, or repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such agreement 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,
certificates of deposit, mortgage loans
or interests therein, 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, certificate of deposit, loan,
interest, group or index, or option;
``(V) means any margin loan;
``(VI) means any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) means any combination of the
agreements or transactions referred to
in this clause;
``(VIII) means any option to enter
into any agreement or transaction
referred to in this clause;
``(IX) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), (IV), (V), (VI), (VII), or
(VIII), together with all supplements
to any such master agreement, without
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
considered 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), (III), (IV), (V), (VI),
(VII), or (VIII); and
``(X) means any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this clause.''.
(c) Definition of Commodity Contract.--Section 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 follows:
``(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
futures 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
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade that is cleared by such clearing
organization, or commodity option
traded on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing
organization;
``(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
transaction referred to in subclause
(I), (II), (III), (IV), (V), (VI),
(VII), or (VIII), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
commodity contract under this clause,
except that the master agreement shall
be considered 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) any security agreement or
arrangement or other credit enhancement
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 transaction,
reverse repurchase transaction,
consignment, lease, swap, hedge
transaction, deposit, loan, option,
allocated transaction, unallocated
transaction, or any other similar
agreement;
``(II) any combination of agreements
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
transaction referred to in subclause
(I), (II), or (III), together with all
supplements 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 considered to be a forward contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), or (III); or
``(V) any security agreement or
arrangement or other credit enhancement
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 definition also
applies to the term `reverse repurchase
agreement')--
``(I) means an agreement, including
related terms, which provides for the
transfer of 1 or more certificates of
deposit, mortgage-related securities
(as such term is defined in the
Securities Exchange Act of 1934),
mortgage loans, interests in mortgage-
related securities or mortgage loans,
eligible bankers' acceptances,
qualified foreign government securities
or securities that are direct
obligations of, or that are fully
guaranteed 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, securities,
loans, or interests with a simultaneous
agreement by such transferee to
transfer to the transferor thereof
certificates of deposit, eligible
bankers' acceptances, securities,
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;
``(II) does not include any
repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such participation within
the meaning of such term;
``(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (IV);
``(IV) means any option to enter into
any agreement or transaction referred
to in subclause (I) or (III);
``(V) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
repurchase agreement under this clause,
except that the master agreement shall
be considered to be a repurchase
agreement under this subclause only
with respect to each agreement or
transaction under the master agreement
that is referred to in subclause (I),
(III), or (IV); and
``(VI) means any security agreement
or arrangement or other credit
enhancement related to any agreement or
transaction referred to in subclause
(I), (III), (IV), or (V).
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 central
government of a member of the Organization for
Economic Cooperation and Development (as
determined by regulation or order adopted by
the appropriate Federal banking authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi) of the
Federal 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, 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 or precious metals
agreement; a currency swap, option,
future, or forward agreement; an equity
index or equity swap, option, future,
or forward agreement; 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; or a weather swap,
weather derivative, or a weather
option;
``(II) any agreement or transaction
similar to any other agreement or
transaction referred to in this clause
that is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference in
such agreement) and that is a forward,
swap, future, or option on 1 or more
rates, currencies, commodities, equity
securities or other equity instruments,
debt securities or other debt
instruments, or economic indices or
measures of economic risk or value;
``(III) any combination of agreements
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
transaction referred to in subclause
(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 not a
swap agreement under this clause,
except that the master agreement shall
be considered to be a swap agreement
under this clause only with respect to
each agreement or transaction 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 enhancement
related to any agreements or
transactions referred to in
subparagraph (I), (II), (III), (IV), or
(V).
Such term is applicable for purposes of this
title only and shall not be construed or
applied so as to challenge or affect the
characterization, definition, or treatment of
any swap agreement 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 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 `transfer' means
every mode, direct or indirect, absolute or
conditional, voluntary or involuntary, of
disposing of or parting with property or with
an interest in property, including retention of
title as a security interest and foreclosure of
the depository institutions's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section 11(e)(8) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is amended--
(1) in subparagraph (A), by striking ``paragraph (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, liquidation, 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 of the United States
(12 U.S.C. 91) or any other Federal or State law relating to the
avoidance of preferential or fraudulent transfers,'' before ``the
Corporation''.
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 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 (e)(10)''; and
(2) by adding at the end 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 manner, the right or power of
the Corporation to transfer any qualified financial
contract in accordance with paragraphs (9) and (10) of
this subsection or to disaffirm or repudiate any such
contract in accordance with paragraph (1).
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and (E), and
sections 403 and 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991,
no walkaway clause shall be enforceable in a
qualified financial 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 parties in accordance with its
terms upon termination, 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
appointment''.
SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL
CONTRACTS.
(a) Transfers of Qualified Financial Contracts 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 contracts.--
``(A) In general.--In making any transfer of assets
or liabilities of a depository institution in default
which includes any qualified financial 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 bankruptcy,
or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding--
``(I) all qualified financial
contracts between any person or any
affiliate of such person and the
depository 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 depository
institution against such person or any
affiliate of such person under any such
contract; and
``(IV) all property securing or any
other credit enhancement for any
contract described in subclause (I) or
any claim described in subclause (II)
or (III) under any such contract; or
``(ii) transfer none of the qualified
financial contracts, claims, property or other
credit enhancement referred to in clause (i)
(with respect to such person and any affiliate
of such person).
``(B) Transfer to foreign bank, foreign financial
institution, or branch or agency of a foreign bank or
financial institution.--In transferring any qualified
financial contracts and related claims and property
pursuant to subparagraph (A)(i), the conservator or
receiver for such depository institution 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, any security agreement or arrangement or
other credit enhancement related to 1 or more qualified
financial contracts, the contractual rights of the
parties to such qualified financial contracts, netting
contracts, security agreements or arrangements, or
other credit enhancements are enforceable substantially
to the same extent as permitted under this section.
``(C) Transfer of contracts subject to the rules of a
clearing organization.--In the event that a conservator
or receiver transfers any qualified financial contract
and related claims, property and credit enhancements
pursuant to subparagraph (A)(i) and such contract is
subject 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 futures commission
merchant, or any other institution as determined by the
Corporation by regulation 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 Deposit Insurance Act (12 U.S.C. 1821(e)(10))
is further amended--
(1) by redesignating subparagraph (B) as subparagraph (D);
and
(2) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(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 Corporation Improvement Act
of 1991 solely by reason of or incidental to
the appointment of a receiver for the
depository institution (or the insolvency or
financial condition 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 receiver; or
``(II) after the person has received
notice that the contract has been
transferred pursuant to paragraph
(9)(A).
``(ii) Conservatorship.--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)(E) or section 403 or 404 of the Federal
Deposit Insurance 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
institution for which the conservator has been
appointed).
``(iii) Notice.--For purposes of this
subsection, the Corporation as receiver or
conservator 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 Corporation has taken steps reasonably
calculated to provide notice to such person by
the time specified in subparagraph (A) of this
subsection.
``(C) Treatment of bridge banks.--The following
institutions shall not be considered a financial
institution for which a conservator, 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
paragraph (9)--
``(i) a bridge bank; or
``(ii) a depository institution organized by
the Corporation, for which a conservator is
appointed either--
``(I) immediately upon the
organization 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.
(a) In General.--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 following new
paragraph:
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which an insured depository
institution is a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified financial
contracts between--
``(i) any person or any affiliate of such
person; and
``(ii) the depository institution in default;
or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A)
(with respect to such person or any affiliate of such
person).''.
(b) Technical and Conforming Amendments.--Section 11(e)(8) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)), as amended by
section 2(i), is further amended in subparagraph (C)(i), by striking
``(11)'' and inserting ``(12)''.
SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance 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 master agreement for any
contract or agreement described in any
preceding clause of this subparagraph (or any
master agreement for such master agreement or
agreements), 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 qualified financial contract
only with respect to those transactions that
are themselves qualified financial
contracts.''.
SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991.
(a) Definitions.--Section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended--
(1) in paragraph (2)--
(A) by inserting ``or exempt from such registration
pursuant to an order of the Securities and Exchange
Commission'' before the semicolon at the end of
subparagraph (A)(ii); and
(B) by inserting ``or that has been granted an
exemption pursuant to section 4(c)(1) of such Act''
before the period at the end of subparagraph (B);
(2) 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 uninsured
State bank that is a member of the Federal Reserve
System if the national bank or State member bank is not
eligible to make application to become an insured bank
under section 5 of the Federal Deposit Insurance
Act;''; and
(C) by amending subparagraph (C) (as redesignated) 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 established the branch or agency,
as those terms are defined in section 1(b) of the
International Banking Act of 1978;'';
(3) in paragraph (11), by adding before the period ``and any
other clearing organization with which such clearing
organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between
two or more financial institutions, clearing
organizations, or members that provides for
netting present or future payment obligations
or payment entitlements (including liquidation
or closeout values relating to such obligations
or entitlements) among the parties to the
agreement; and''; and
(5) 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, including a payment or delivery to
liquidate an unmatured obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--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 follows:
``(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 section 5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment obligations and the
covered contractual payment entitlements between any two financial
institutions shall be netted in accordance with, and subject to the
conditions of, the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(f) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two financial institutions
shall be enforceable in accordance with their terms (except as provided
in section 561(b)(2) of title 11, United States Code) 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 Securities
Investor Protection Act of 1970).''.
(c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4404) is amended--
(1) by amending subsection (a) to read as follows:
``(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 1970), 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 netting contract (except as provided in section 561(b)(2) of
title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(h) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two members of a clearing
organization shall be enforceable in accordance with their terms
(except as provided in section 561(b)(2) of title 11, United States
Code) 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 Securities Investor Protection Act of 1970).''.
(d) Enforceability of Contracts With Uninsured National Banks and
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is
amended--
(1) by redesignating section 407 as section 407A; 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 provision of law,
paragraphs (8), (9), (10), 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 receiver' or `the
receiver or the Corporation' shall refer to the receiver of an
uninsured national bank or uninsured 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 `Corporation, whether
acting as such or as conservator or receiver', a `receiver', or
a `conservator' shall refer to the receiver or conservator of
an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
and
``(3) any reference to an `insured depository institution' 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 conservator of an
uninsured national bank or uninsured Federal 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 institutions
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 promulgating regulations to
implement this section, the Comptroller of the Currency shall
ensure that the regulations generally are consistent with the
regulations and policies of the Federal Deposit Insurance
Corporation 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 Forward Contract, Repurchase Agreement, Securities
Clearing Agency, Swap Agreement, Commodity Contract, and Securities
Contract.--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 following:
``(B) any combination of agreements or transactions
referred to in subparagraphs (A) and (C);
``(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or (B);
``(D) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), or (C), together with all supplements to any
such master agreement, without regard to whether such
master agreement provides for an agreement or
transaction that is not a forward contract under this
paragraph, except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement or
transaction under such master agreement that is
referred to in subparagraph (A), (B) or (C); or
``(E) any security agreement or arrangement, or other
credit enhancement related to any agreement or
transaction referred to in subparagraph (A), (B), (C),
or (D), but not to exceed the actual value of such
contract on the date of the filing of the petition;'';
(B) in paragraph (46), by striking ``on any day
during the period beginning 90 days before the date
of'' and inserting ``at any time before'';
(C) 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 1 or more
certificates of deposit, mortgage-related
securities (as defined in the Securities
Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or
mortgage loans, eligible bankers' acceptances,
qualified foreign government securities, or
securities that are direct obligations of, or
that are fully guaranteed 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, securities, loans, or interests,
with a simultaneous agreement by such
transferee to transfer to the transferor
thereof certificates of deposit, eligible
bankers' acceptance, securities, loans, or
interests of the kind described above, at a
date certain not later than 1 year after such
transfer or on demand, against the transfer of
funds;
``(ii) any combination of agreements or
transactions referred to in clauses (i) and
(iii);
``(iii) an option to enter into an agreement
or transaction referred to in clause (i) or
(ii);
``(iv) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), or (iii), together with all
supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a repurchase agreement under this
paragraph, except that such master agreement
shall be considered to be a repurchase
agreement under this paragraph only with
respect to each agreement or transaction under
the master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) any security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in clause
(i), (ii), (iii), or (iv), but not to exceed
the actual value of such contract on the date
of the filing of the petition; and
``(B) does not include a repurchase obligation under
a participation in a commercial mortgage loan,
and, for purposes of this paragraph, the term `qualified
foreign government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development;'';
(D) in paragraph (48) by inserting ``or exempt from
such registration under such section pursuant to an
order of the Securities and Exchange Commission'' after
``1934''; and
(E) by amending paragraph (53B) to read as follows:
``(53B) `swap agreement'--
``(A) means--
``(i) any agreement, including the terms and
conditions incorporated by reference in 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 or precious metals
agreement; a currency swap, option, future, or
forward agreement; an equity index or an equity
swap, option, future, or forward agreement; a
debt index or a debt swap, option, future, or
forward agreement; a credit spread or a credit
swap, option, future, or forward agreement; a
commodity index or a commodity swap, option,
future, or forward agreement; or a weather
swap, weather derivative, or weather option;
``(ii) any agreement or transaction similar
to any other agreement or transaction referred
to in this paragraph that--
``(I) is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference
therein); and
``(II) is a forward, swap, future, or
option on 1 or more rates, currencies,
commodities, equity securities, or
other equity instruments, debt
securities or other debt instruments,
or economic indices or measures of
economic risk or value;
``(iii) any combination of agreements or
transactions referred to in this paragraph;
``(iv) any option to enter into an agreement
or transaction referred to in this paragraph;
``(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, and
without regard to whether the master agreement
contains an agreement or transaction that is
not a swap agreement under this paragraph,
except that the master agreement shall be
considered to be a swap agreement under this
paragraph only with respect to each agreement
or transaction under the master agreement that
is referred to in clause (i), (ii), (iii), or
(iv); or
``(B) any security agreement or arrangement or other
credit enhancement related to any agreements or
transactions referred to in subparagraph (A), but not
to exceed the actual value of such contract on the date
of the filing of the petition; and
``(C) is applicable for purposes of this title only
and shall not be construed or applied so as to
challenge or affect the characterization, definition,
or treatment of any swap agreement 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 Futures Trading Commission.'';
(2) by amending section 741(7) to read as follows:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase, sale, or
loan of a security, a certificate of deposit, a
mortgage loan or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit or mortgage loans or
interests therein (including an interest
therein or based on the value thereof), or
option on any of the foregoing, including an
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 national
securities exchange relating to foreign
currencies;
``(iii) the guarantee by or to any securities
clearing agency of a settlement of cash,
securities, certificates of deposit, mortgage
loans or interests therein, group or index of
securities, or mortgage loans or interests
therein (including any interest therein or
based on the value thereof), or option on any
of the foregoing, including an option to
purchase or sell any such security, certificate
of deposit, loan, interest, group or index, or
option;
``(iv) any margin loan;
``(v) any other agreement or transaction that
is similar to an agreement or transaction
referred to in this paragraph;
``(vi) any combination of the agreements or
transactions referred to in this paragraph;
``(vii) any option to enter into any
agreement or transaction referred to in this
paragraph;
``(viii) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), (iii), (iv), (v), (vi), or
(vii), together with all supplements to any
such master agreement, without regard to
whether the master agreement provides for an
agreement or transaction that is not a
securities contract under this paragraph,
except that such master agreement shall be
considered to be a securities contract under
this paragraph only with respect to each
agreement or transaction under such master
agreement that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii); or
``(ix) any security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in this
paragraph, but not to exceed the actual value
of such contract on the date of the filing of
the petition; and
``(B) does not include any purchase, sale, or
repurchase obligation under a participation in a
commercial mortgage loan.''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of subparagraph
(D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction that is
similar to an 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 an agreement or
transaction referred to in this paragraph;
``(I) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), or (H), together
with all supplements to such master agreement, without
regard to whether the master agreement provides for an
agreement 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) any security agreement or arrangement or other
credit enhancement related to any agreement or
transaction referred to in this paragraph, but not to
exceed the actual value of such contract on the date of
the filing of the petition;''.
(b) Definitions of Financial Institution, Financial Participant, and
Forward Contract Merchant.--Section 101 of title 11, United States
Code, is amended--
(1) by striking paragraph (22) and inserting the following
new paragraph:
``(22) the term `financial institution'--
``(A) means a Federal reserve bank or an entity
(domestic or foreign) that is a commercial or savings
bank, industrial savings bank, savings and loan
association, trust company, a bank or a corporation
organized under section 25A of the Federal Reserve Act
and, when any such bank or entity is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741, such
customer; and
``(B) includes any person described in subparagraph
(A) which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of the
Federal Deposit Insurance Corporation Improvement Act
of 1991;'';
(2) by inserting after paragraph (22) the following:
``(22A) `financial participant' means an 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 described in
paragraph (1), (2), (3), (4), (5), or (6) of section 561(a)
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 (aggregated across
counterparties) in 1 or more such agreement or transaction with
the debtor or any other entity (other than an affiliate) on any
day during the previous 15-month period;''; and
(3) by amending paragraph (26) to read as follows:
``(26) `forward contract merchant' means a Federal reserve
bank, or an entity 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, 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.--Section 101 of title 11, United States Code, is
amended by inserting after paragraph (38) the following new paragraphs:
``(38A) `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 described 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
agreements or transactions that are not contracts described in
paragraphs (1) through (5) of section 561(a), the master
netting agreement shall bedeemed 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) `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, Repurchase Agreements, and Master Netting Agreements
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 a mutual debt and claim under or in connection
with 1 or more swap agreements that constitutes the setoff of a
claim against the debtor for any payment or other transfer of
property 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 held by, pledged
to and under the control of, or due from such swap participant
to margin, guarantee, secure, or settle any swap agreement;'';
(D) in paragraph (18) by striking the period at the
end 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 or
any contract or agreement subject to such agreements that
constitutes the setoff of a claim against the debtor for any
payment or other transfer of property due from the debtor under
or in connection with such agreements or any contract or
agreement subject to such agreements against any payment due to
the debtor from such master netting agreement participant under
or in connection with such agreements or any contract or
agreement subject to such agreements or against cash,
securities, or other property held by, pledged to and under the
control of, or due from such master netting agreement
participant to margin, guarantee, secure, or settle such
agreements or any contract or agreement subject to such
agreements, to the extent such participant is eligible to
exercise such offset rights 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:
``(i) Limitation.--The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7), or (17),
or (32) 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''; and
(B) by striking ``in connection with a swap
agreement'' and inserting ``under or in connection with
any swap agreement''; and
(2) by adding at the end the following:
``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b), the trustee may not avoid a transfer made by or to a master
netting agreement participant under or in connection with any master
netting agreement or any individual contract covered thereby that is
made before the commencement of the case, except under section
548(a)(1)(A), and except to the extent the trustee could otherwise
avoid such a transfer made under an individual contract covered by such
master netting agreement.''.
(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 subparagraph:
``(E) a master netting agreement participant that receives a
transfer in connection with a master netting agreement or any
individual contract covered thereby takes for value to the
extent of such transfer, except, with respect to a transfer
under any individual contract covered thereby, to the extent
such master netting agreement participant otherwise did not
take (or is otherwise not deemed to have taken) such transfer
for value.''.
(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 as follows:
``Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(i) Termination or Acceleration of Repurchase Agreements.--Section
559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(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 as follows:
``Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement'';
(2) in the first sentence, by striking ``termination of a
swap agreement'' and inserting ``liquidation, 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.--(1) Title 11, United States
Code, is amended by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts
``(a) In General.--Subject to subsection (b), the exercise of any
contractual right, because of a condition of the kind specified in
section 365(e)(1), to cause the termination, liquidation, or
acceleration of or to offset or net termination values, payment amounts
or other transfer obligations arising under or in connection with 1 or
more (or the termination, 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 operation 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) If a debtor is a commodity broker subject to subchapter
IV of chapter 7--
``(A) 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 connection with, other instruments, contracts, or
agreements listed in subsection (a), except to the
extent the party has positive net equity in the
commodity accounts at the debtor, as calculated under
such subchapter; and
``(B) another commodity broker may not net or offset
an obligation to the debtor arising under, or in
connection with, a commodity contract entered into or
held on behalf of a customer of the debtor against any
claim arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
``(c) Rule of Application.--Subparagraphs (A) and (B) of subsection
(b)(2) shall not be construed as prohibiting the offset of claims and
obligations arising pursuant to--
``(1) a cross-margining arrangement that has been approved by
the Commodity Futures Trading Commission or that has been
submitted to such Commission pursuant to section 5a(a)(12) of
the Commodity Exchange Act and has been permitted to go into
effect; or
``(2) another netting arrangement, between a clearing
organization (as defined in section 761) and another entity,
that has been approved by the Commodity Futures Trading
Commission.
``(d) 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 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 evidenced in writing,
arising under common law, under law merchant, or by reason of normal
business practice.''.
(2) Conforming amendment.--The table of sections of chapter 5 of
title 11, United States Code, is amended by inserting after the item
relating to section 560 the following:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts.''.
(l) Municipal Bankruptcies.--Section 901(a) 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, repurchase agreements, swap
agreements, or master netting agreements shall apply in a case
ancillary to a foreign proceeding under this section or any other
section of this title so that enforcement of contractual provisions of
such contracts and agreements in accordance with their terms will not
be stayed or otherwise limited by operation of any provision 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 (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:
``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers,
financial institutions, financial participants,
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, financial participant, securities 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.''.
(o) Stockbroker Liquidations.--Title 11, United States Code, is
amended by inserting after section 752 the following:
``Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants, 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, securities clearing agency, swap participant,
repo participant, financial 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.''.
(p) Setoff.--Section 553 of title 11, United States Code, is
amended--
(1) in subsection (a)(3)(C), by inserting ``(except for a
setoff of a kind described in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(32), 555, 556, 559, 560 or 561)'' before the
period; and
(2) in subsection (b)(1), by striking ``362(b)(14)'' and
inserting ``362(b)(17), 362(b)(32), 555, 556, 559, 560, 561''.
(q) Securities Contracts, Commodity Contracts, 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 inserting
``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 ``financial
participant,'' after ``financial institution,'';
(4) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by inserting before the period at the end ``, 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 in writing,
arising under common law, under law merchant, or by
reason of normal business practice''; and
(5) in section 556, by inserting ``, financial participant''
after ``commodity broker''.
(r) Conforming Amendments.--Title 11, United States Code, is
amended--
(1) in the table of sections of chapter 5--
(A) by amending the items relating to sections 555
and 556 to read as follows:
``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.'';
and
(B) by amending the items relating to sections 559
and 560 to read as follows:
``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';
and
(2) in the table of sections of chapter 7--
(A) by inserting after the item relating to section
766 the following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions, financial
participants, securities clearing agencies, swap participants, repo
participants, and master netting agreement participants.'';
and
(B) by inserting after the item relating to section
752 the following:
``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions, financial
participants, securities clearing agencies, swap participants, repo
participants, and master netting agreement participants.''.
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 appropriate Federal banking
agencies, may prescribe regulations requiring more
detailed recordkeeping with respect to qualified
financial contracts (including market valuations) by
insured depository institutions.''.
SEC. 10. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION 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 provide for the lawful
collateralization of--
``(A) deposits of, or other credit extension by, a
Federal, State, or local governmental entity, or of any
depositor referred to in section 11(a)(2), including an
agreement to provide collateral 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 Federal home loan bank;
or
``(D) 1 or more qualified financial contracts, as
defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph (1)(B) solely
because such agreement was not executed contemporaneously with
the acquisition of the collateral or because of pledges,
delivery, or substitution of the collateral made in accordance
with such agreement.''.
SEC. 11. DAMAGE MEASURE.
(a) In General.--Title 11, United States Code, is amended--
(1) by inserting after section 561 the following:
``Sec. 562. Damage measure in connection with swap agreements,
securities contracts, forward contracts, commodity
contracts, repurchase agreements, or master netting
agreements
``If the trustee rejects a swap agreement, securities contract as
defined in section 741, forward contract, commodity contract (as
defined in section 761) repurchase agreement, or master netting
agreement pursuant to section 365(a), or if a forward contract
merchant, stockbroker, financial institution, securities clearing
agency, repo participant, financial participant, master netting
agreement participant, or swap participant liquidates, terminates, or
accelerates 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.''; and
(2) in the table of sections of chapter 5 by inserting after
the item relating to section 561 the following:
``562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts, repurchase
agreements, or master netting agreements.''.
(b) Claims Arising From Rejection.--Section 502(g) of title 11,
United States Code, is amended--
(1) by designating the existing text as paragraph (1); and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with section 562
shall be allowed under subsection (a), (b), or (c), or disallowed under
subsection (d) or (e), as if such claim had arisen before the date of
the filing of the petition.''.
SEC. 12. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection Act of 1970 (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, United States Code, neither the filing of
an application under subsection (a)(3) nor any
order or decree obtained by the Securities
Investor Protection Corporation from the court
shall operate as a stay of any contractual
rights of a creditor to liquidate, terminate,
or accelerate a securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master netting
agreement, each as defined in title 11 United
States Code, to offset or net termination
values, payment amounts, or other transfer
obligations 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 or disposition of
securities collateral pledged by the debtor,
whether or not with respect to 1 or more of
such contracts or agreements, securities sold
by the debtor under a repurchase agreement or
securities lent under a securities lending
agreement.
``(iii) 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 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 in writing, arising under common law,
under law merchant, or by reason of normal
business practice.''.
SEC. 13. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by striking ``or'' at the end of paragraph
(4)(B)(ii);
(B) by redesignating paragraph (5) as paragraph (6);
and
(C) by inserting after paragraph (4) 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
recovered by the trustee under section 550 by virtue of
avoidance under section 548(a)(1); or''; and
(2) by adding at the end the following new subsection:
``(e) For purposes of this section, the following definitions shall
apply:
``(1) the term `asset-backed securitization' means a
transaction in which eligible assets transferred to an eligible
entity are used as the source of payment on securities,
including all securities issued by governmental units, at least
1 class or tranche of which is rated investment grade by 1 or
more nationally recognized securities rating organizations,
when the securities are initially issued by an issuer;
``(2) the term `eligible asset' means--
``(A) financial assets (including interests therein
and proceeds thereof), either fixed or revolving,
whether or not such assets are in existence as of the
date of the transfer, including residential and
commercial mortgage loans, consumer receivables, trade
receivables, assets of governmental units (including
payment obligations relating to taxes, receipts, fines,
tickets, and other sources of revenue), and lease
receivables, that, by their terms, convert into cash
within a finite time period, plus any residual interest
in property subject to receivables included in such
financial assets plus any rights or other assets
designed to assure the servicing or timely distribution
of proceeds to security holders;
``(B) cash; and
``(C) securities, including all securities issued by
governmental units.
``(3) the term `eligible entity' means--
``(A) an issuer; or
``(B) a trust, corporation, partnership, governmental
unit, limited liability company (including a single
member limited liability company), or other entity
engaged exclusively in the business of acquiring and
transferring eligible assets directly or indirectly to
an issuer and taking actions ancillary thereto;
``(4) the term `issuer' means a trust, corporation,
partnership, governmental unit, limited liability company
(including a single member limited liability company), or other
entity engaged exclusively in the business of acquiring and
holding eligible assets, issuing securities backed by eligible
assets, and taking actions ancillary thereto; and
``(5) 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
intention of removing them from the estate of the debtor
pursuant to subsection (b)(5) (whether or not reference is made
to this title or any section of this title), irrespective,
without limitation, of--
``(A) whether the debtor directly or indirectly
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,
contribution, or other conveyance for tax, accounting,
regulatory reporting, or other purposes.''.
SEC. 14. APPLICATION OF AMENDMENTS.
The amendments made by this Act shall apply with respect to cases
commenced or appointments made under any Federal or State law after the
date of the enactment of this Act, but shall not apply with respect to
cases commenced or appointments made under any Federal or State law
before the date of the enactment of this Act.
Purpose and Summary
H.R. 1161, the Financial Contract Netting Improvement Act
of 2000 (Act), is based on legislative proposals forwarded to
Congress by the nation's financial regulators in order to guard
against systemic risk to the nation's financial system. The
major provisions of this Act come from recommendations made by
the President's Working Group on Financial Markets following a
review of current statutory provisions governing the treatment
of qualified financial contracts and similar financial
contracts upon the insolvency of a counter party. The Working
Group for these recommendations consisted of the Securities and
Exchange Commission; the Commodity Futures Trading Commission;
the Federal Deposit Insurance Corporation; the Department of
the Treasury, including the Office of the Comptroller of the
Currency; the Board of Governors of the Federal Reserve System;
and the Federal Reserve Bank of New York. The recommendations
of the Working Group were transmitted to Congress on March 16,
1998.
The provisions forwarded by the Working Group amend the
U.S. Bankruptcy Code; the Federal Deposit Insurance Act (FDIA),
as amended by the Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 (FIRREA); the payment system risk
reduction and netting provisions of the Federal Deposit
Insurance Corporation Improvement Act of 1991 (FDICIA); and the
Securities Investor Protection Act of 1971 (SIPA). These
amendments address the treatment of certain financial
transactions following the insolvency of a party to such
transactions. The amendments are designed to clarify and
improve consistency between the applicable statutes and to
minimize risk of a disruption within or between financial
markets upon the insolvency of a market participant. In
addition, the Bankruptcy Code is amended to provide that
certain assets transferred to an eligible entity in connection
with an asset-backed securitization generally will be
considered as valid transfers and not be included within the
bankruptcy estate of the debtor.
Background and Need for Legislation
Since its adoption in 1978, the Bankruptcy Code has been
amended several times to afford different treatment for certain
financial transactions upon the bankruptcy of a debtor, as
compared with the treatment of other commercial contracts and
transactions. These amendments were designed to further the
policy goal of minimizing the systemic risk potentially arising
from certain interrelated financial activities and markets.
Similar amendments have been made to the FDIA and FDICIA, and
both the Federal Deposit Insurance Corporation (FDIC) and the
Securities Investor Protection Corporation (SIPC) have issued
policy statements and letters clarifying general issues in this
regard.
Systemic risk is the risk that the failure of a firm or
disruption of a market or settlement system will cause
widespread difficulties at other firms, in other market
segments or in the financial system as a whole. If participants
in certain financial activities are unable to enforce their
rights to terminate financial contracts with an insolvent
entity in a timely manner, or to offset or net their various
contractual obligations, the resulting uncertainty and
potential lack of liquidity could increase the risk of an
inter-market disruption.
The Committee and Congress have taken steps in the past to
ensure that the risk of such systemic events is minimized. For
example, both the Bankruptcy Code and the FDIA contain
provisions that protect the rights of financial participants to
terminate swap agreements, forward contracts, securities
contracts, commodity contracts and repurchase agreements
following the bankruptcy or insolvency of a counter party to
such contracts or agreements. Furthermore, other provisions
prevent transfers made under such circumstances from being
avoided as preferences or fraudulent conveyances (except when
made with actual intent to defraud). Protections also are
afforded to ensure that the netting, set off and collateral
foreclosure provisions of such transactions and master
agreements for such transactions are enforceable.
In addition, FDICIA was enacted in 1991 to protect the
enforceability of close-out netting provisions in ``netting
contracts'' between ``financial institutions.'' FDICIA states
that the goal of enforcing netting arrangements is to reduce
systemic risk within the banking system and financial markets.
In simple terms, netting occurs when money payments,
entitlements, or obligations arising under one or more
contracts or a clearing arrangement are all offset against each
other leaving one net amount.
The orderly resolution of insolvencies involving counter
parties to such contracts also is an important element in the
reduction of systemic risk. The FDIA allows the receiver of an
insolvent insured depository institution the opportunity to
review the status of certain contracts to determine whether to
terminate or transfer the contracts to new counter parties.
These provisions provide the receiver with flexibility in
determining the most appropriate resolution for the failed
institution and facilitate the reduction of systemic risk by
permitting the transfer, rather than termination, of such
contracts.
Not only does this Act update legislation initiated by the
Committee in 1989 and 1991 but it also builds on
recommendations first contained in a comprehensive report (Part
3 of Committee hearing record 103-88) on derivatives issued on
October 28, 1993, by the minority staff of the Committee under
the direction of then Ranking Minority Member, Representative
Leach. During preparation of the report, the staff submitted a
series of questions to Federal financial regulatory bodies
concerning the adequacy and consistency of the netting
provisions contained in the Bankruptcy Code, FIRREA, and
FDICIA. In sum, all agencies stated that the netting provisions
should be amended and conformed to provide greater certainty to
the market. The agencies stated that the differences in
coverage provided by the various acts have created legal
uncertainty, emanating mainly from the definitional sections of
FIRREA and the Bankruptcy Code which limit netting to specific
types of contracts expressly enumerated.
In summary, the insolvency provisions of the Act are
designed to clarify the treatment of certain financial
contracts upon the insolvency of a counter party and to promote
the reduction of systemic risk. These provisions further the
goals of prior amendments to the Bankruptcy Code and the FDIA
on the treatment of those financial contracts and of the
payment system risk reduction provisions in FDICIA. The
insolvency provisions of the Act have four principal purposes:
To strengthen the provisions of the Bankruptcy Code
and the FDIA that protect the enforceability of
termination and close-out netting and related
provisions of certain financial agreements and
transactions.
To harmonize the treatment of these financial
agreements and transactions under the Bankruptcy Code
and the FDIA.
To amend the FDIA and FDICIA to clarify that certain
rights of the FDIC acting as conservator or receiver
for a failed insured depository institution (and in
some situations, rights of SIPC and receivers of
certain uninsured institutions) cannot be defeated by
operation of the terms of FDICIA.
To make other substantive and technical amendments to
clarify the enforceability of financial agreements and
transactions in bankruptcy or insolvency.
All these changes are designed to further minimize systemic
risk to the banking system and the financial markets.
Hearings
On March 17, 1999, Representatives Leach, LaFalce, and
Roukema introduced H.R. 1161. On April 11, 2000, the Committee
held a hearing on the Working Group legislative recommendations
concerning over-the-counter derivatives, hedge funds, and
netting proposals as contained in H.R. 1161. Appearing before
the Committee were: The Honorable Richard H. Baker, Chairman,
Subcommittee on Capital Markets, Securities, and Government-
Sponsored Enterprises; Lewis A. Sachs, Assistant Secretary for
Financial Markets, Department of the Treasury; Patrick M.
Parkinson, Associate Director, Division of Research and
Statistics, Board of Governors of the Federal Reserve System;
Annette L. Nazareth, Director, Division of Market Regulation,
U.S. Securities and Exchange Commission; C. Robert Paul,
General Counsel, Commodity Futures Trading Commission; Daniel
P. Cunningham, Partner, Cravath, Swaine & Moore, on behalf of
The International Swaps and Derivatives Association, Inc.; Mr.
ShawnDorsch, President, Chief Operating Officer, and Co-
Founder, DNI Holdings, Inc. (Blackbird); Mark D. Young, Partner,
Kirland & Ellis, on behalf of The Chicago Board of Trade; Terrence A.
Duffy, Vice Chairman, The Chicago Mercantile Exchange; Mark C.
Brickell, Managing Director, J.P. Morgan & Co., Inc.; Michael A.
Watkins, Deputy General Counsel, First Union Corporation, on behalf of
The ABA Securities Association; Garrett Glass, Chief Market Risk
Officer, Bank One Corporation, on behalf of The Financial Services
Roundtable; George Crapple, Chairman, The Managed Funds Association;
and William P. Miller II, Chairman of the Executive Committee, The End
Users of Derivatives Council of the Association for Financial
Professionals.
Committee Consideration and Votes
On July 27, 2000, the full Committee met in open session to
consider H.R. 1161, the Financial Contract Netting Improvement
Act of 2000. A quorum being present, the Committee by voice
vote passed H.R. 1161 with an amendment and ordered it to be
favorably reported with an amendment to the full House of
Representatives for consideration. Also, the Committee adopted,
by voice vote, a motion to authorize the Chairman to offer such
motions as may be necessary in the House of Representatives to
go to conference with the Senate on a similar bill.
Committee Oversight Findings
In compliance with clause 3(c)(1) of rule XIII of the Rules
of the House of Representatives, the Committee reports that the
findings and recommendations of the Committee, based on
oversight activities under clause 2(b)(1) of rule X of the
Rules of the House of Representatives, are incorporated in the
descriptive portions of this report.
Committee on Government Reform and Oversight Findings
As provided for in clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, no oversight findings have
been submitted to the Committee by the Committee on Government
Reform.
Constitutional Authority
In compliance with clause 3(d)(1) of rule XIII of the Rules
of the House of Representatives, the Constitutional Authority
of Congress to enact this legislation is derived from Article
I, section 8, clause 1 (relating to the general welfare of the
United States): Article I, section 8, clause 3 (relating to
Congressional power to regulate commerce); Article 1, section
8, clause 5 (relating to the power ``to coin money'' and
``regulate the value thereof''); and Article I, section 8,
clause 18 (relating to making all laws necessary and proper for
carrying into execution powers vested by the Constitution in
the government of the United States).
New Budget Authority and Tax Expenditures
Clause 3(c)(2) of rule XIII of the Rules of the House of
Representatives is inapplicable because this legislation does
not provide new budgetary authority or increased tax
expenditures.
Advisory Committee Statement
No advisory committees within the meaning of section 5(b)
of the Federal Advisory Committee Act were created by this
legislation.
Congressional Accountability Act
The reporting requirement under section 102(b)(3) of the
Congressional Accountability Act (P.L. 104-1) is inapplicable
because this legislation does not relate to terms and
conditions of employment or access to public services or
accommodations.
Congressional Budget Office Cost Estimate and Unfunded Mandates
Analysis
U.S. Congress,
Congressional Budget Office,
Washington, DC, September 7, 2000.
Hon. James A. Leach,
Chairman, Committee on Banking and Financial Services, House of
Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1161, the
Financial Contract Netting Improvement Act of 2000.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Mark Hadley.
Sincerely,
Barry B. Anderson
(For Dan L. Crippen, Director).
Enclosure.
H.R. 1161--Financial Contract Netting Improvement Act of 2000
Summary: H.R. 1161 would amend banking and bankruptcy laws
to provide consistent treatment of certain financial contracts
and to encourage the settlement by a single payment, on a net
basis, of all the contracted-but-not-yet-due claims and
liabilities of an insolvent institution. The purpose of netting
is to reduce the risks, especially the systemic risk associated
with activities in derivatives markets, that the failure of one
entity will disrupt and endanger financial markets. H.R. 1161
would affect direct spending, but CBO estimates that any such
changes would be less than $500,000 annually.
H.R. 1161 contains no intergovernmental mandates as defined
in the Unfunded Mandates Reform Act (UMRA) and would impose no
costs on state, local, or tribal governments. H.R. 1161 would
impose a new private-sector mandate as defined in UMRA, but CBO
estimates that the direct costs of the mandate would be below
the annual threshold established by UMRA for private-sector
mandates ($109 million in 2000, adjusted annually for
inflation).
Estimated cost to the Federal Government: H.R. 1161 would
require the Office of the Comptroller of the Currency (OCC) and
the Federal Deposit Insurance Corporation (FDIC) to issue
regulations to implement the provisions of the legislation. The
OCC charges fees to cover all its administrative costs;
therefore, additional spending by the OCC would have no net
budgetary effect over time. That is not the case with the FDIC,
however, which uses deposit insurance premiums paid by all
banks to cover the expenses it incurs to supervise state-
chartered banks. Because the balances in the deposit insurance
funds exceed the levels required under current law, very few
banks or savings and loans pay premiums for deposit insurance
at this time. Therefore,CBO expects that the FDIC would recover
from premium income very little, if any, of the administrative costs
associated with implementing H.R. 1161. However, we do not expect these
costs to be significant.
The bill would give the FDIC, acting as receiver for
insolvent financial institutions, additional flexibility to
determine the most appropriate method for resolving a failing
bank or savings and loan. As a result, we expect that enacting
H.R. 1161 could help reduce the losses associated with closing
insured institutions. Although it is difficult to assess the
amount of savings, if any, associated with the bill's
clarification of the treatment of certain financial
transactions affecting failing banks and savings and loans, CBO
estimates that the net effect on FDIC outlays would probably be
negligible.
Although enacting this bill could eliminate certain
bankruptcy proceedings, CBO estimates that any reduction in
workload would not have a significant impact on the budgets of
the Executive Office for United States Trustees or the federal
court system.
Pay-as-You-Go Considerations: Under the Balanced Budget and
Emergency Deficit Control Act, provisions providing funding
necessary to meet the government's deposit insurance commitment
are excluded from pay-as-you-go procedures. CBO believes that
the administrative costs associated with the FDIC issuing
regulations under H.R. 1161 are related to safety and soundness
of deposit insurance, and thus, would be excluded. In any case,
we estimate that those changes would be less than $500,000
annually.
Estimated Impact on State, Local, and Tribal Governments:
H.R. 1161 contains no intergovernmental mandates as defined in
UMRA and would impose no costs on state, local, or tribal
governments.
Estimated Impact on the Private Sector: By requiring
insured depository institutions to keep more detailed records
for certain financial contracts, H.R. 1161 would impose a new
private-sector mandate as defined by UMRA. CBO estimates that
the cost of that mandate would not exceed the statutory
threshold ($109 million in 2000, adjusted annually for
inflation). Section 9 would authorize the Federal Deposit
Insurance Corporation to prescribe additional recordkeeping
requirements for certain qualified financial contracts (QFCs)
held by depository institutions.
Under the Federal Deposit Insurance Act (FDIA), QFCs are
defined for five types of financial contracts: securities
contracts, commodity contracts, forward contracts, repurchase
agreements, and swap agreements. FDIA provides special rules
for the treatment of QFCs held by an insured depository
institution in default for which the FDIC is appointed
conservator or receiver. Upon appointment of the FDIC as
receiver for an institution, parties to QFCs receive certain
benefits and rights which are not available to parties to other
types of contracts.
According to the FDIC, the principal purpose of a new
recordkeeping rule under the bill would be to make certain
information on QFCs readily available in the event that the
FDIC is appointed as conservator or receiver of an insolvent
institution. Under the bill (and in current practice), the FDIC
would have the authority to transfer qualified financial
contracts of an insolvent institution to another financial
institution within 24 hours of being appointed as receiver.
Other parties to the QFCs of the insolvent institution would
not be able to terminate and net those contracts until the end
of the 24-hour grace period. The FDIC does not expect that a
recordkeeping rule under the bill would require institutions to
collect new information. Rather, the FDIC anticipates that
institutions would have to ensure that certain data that they
already collect (and record) on QFCs are organized in a manner
that would be accessible to the FDIC. Consequently, CBO expects
that the direct costs of the mandate would not exceed the
threshold established in UMBRA.
Estimate prepared by: Federal Costs: Mark Hadley; Impact on
State, Local, and Tribal Governments: Susan Sieg Tompkins; and
Impact on the Private Sector: Jim Vandenberg.
Estimate approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
House of Representatives,
Committee on Banking and Financial Services,
Washington, DC, September 7, 2000.
Hon. Tom Bliley,
Chairman, Committee on Commerce,Washington, DC.
Dear Tom: I have received your letter concerning H.R. 1161,
which the Committee on Banking and Financial Services on July
27, 2000, voted to favorably report to the House. In your
letter you indicate that the Committee on Commerce would agree
not to seek further consideration of H.R. 1161. I appreciate
your cooperation in this matter and understand that the
Commerce Committee's jurisdictional interest in this
legislation is not prejudiced by such cooperation. Pursuant to
your request I will include a copy of your letter and my
response in the report to accompany H.R. 1161.
Thanks again for your assistance.
Sincerely,
James A. Leach, Chairman.
------
House of Representatives,
Committee on Commerce,
Washington, DC, September 6, 2000.
Hon. Jim Leach,
Chairman, Committee on Banking and Financial Services, Washington, DC.
Dear Jim: I am writing with regard to your committee's
recent action on H.R. 1161, the Financial Contract Netting
Improvement Act of 1999. As you know, the Committee on Commerce
was named as an additional committee of jurisdiction upon the
bill's introduction based upon its jurisdiction over securities
and exchanges pursuant to Rule X of the Rules of the House of
Representatives.
Because of the importance of this legislation, I recognize
your desire to bring it before the House in an expeditious
manner, and I will not exercise the Committee's right to
further consideration of this legislation. By agreeing to waive
its consideration of the bill, however, the Committee on
Commerce does not waive its jurisdiction of H.R. 1161. In
addition, the Committee on Commerce reserves its authority to
seek conferees on any provisions of the bill that are within
its jurisdiction during any House-Senate conference that may be
convened on this or similar legislation. I appreciate your
commitment to support any request by the Commerce Committee for
conferees on H.R. 1161 or similar legislation.
I request that you include a copy of this letter and your
response in your committee report on the bill and as part of
the Record during consideration of the legislation on the House
floor.
Thank you for your attention to these matters.
Sincerely,
Tom Bliley, Chairman.
Section-by-Section Analysis
Section 1. Short title
Section 1 cites the Act as the ``Financial Contract Netting
Improvement Act of 2000''.
Section 2. Treatment of certain agreements by conservators or receivers
of insured depository institutions
Subsections (a) through (f) amend the FDIA definitions of
``qualified financial contract,'' ``securities contract,''
``commodity contract,'' ``forward contract,'' ``repurchase
agreement'' and ``swap agreement'' to make them consistent with
the definitions in the Bankruptcy Code.
Subsection (b) amends the definition of ``securities
contract'' to encompass options on securities and margin loans.
The inclusion of ``margin loans'' in the definition is intended
to encompass only those loans commonly known in the securities
industry as ``margin loans'' and does not include other loans
utilizing securities as collateral, however documented.
Subsection (b) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.'' While
a contract for the purchase or sale or a participation may
constitute a ``securities contract'', the purchase, sale or
repurchase obligation embedded in a participation agreement
does not make that agreement a ``securities contract.''
Subsection (e) amends the definition of ``repurchase
agreement'' to codify the substance of the FDIC's 1995
regulation defining repurchase agreement to include those on
qualified foreign government securities. See 12 C.F.R.
Sec. 360.5. The term ``qualified foreign government
securities'' is defined to include those that are direct
obligations of, or fully guaranteed by, central governments of
members of the Organization for Economic Cooperation and
Development (OECD). Subsection (e) reflects developments in the
repurchase agreement markets, which increasingly use foreign
government securities as the underlying asset. Any risk
presented by this modification is addressed by limiting it to
those issued or guaranteed by OECD member states.
Subsection (e), like subsection (b) for ``securities
contracts'', specifies that repurchase obligations under a
participation in a commercial mortgage loan do not make the
participation agreement a ``repurchase agreement.'' Such
repurchase obligations embedded in participations in commercial
loans (such as recourse obligations) do not constitute a
``repurchase agreement.'' However, a repurchase agreement
involving the transfer of participations in commercial mortgage
loans with a simultaneous agreement to repurchase the
participation on demand or at a date certain one year or less
after such transfer would constitute a ``repurchase
agreement.''
Subsection (f) amends the definition of ``swap agreement''
to include 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 or
precious metals agreement; a currency swap, option, future, or
forward agreement; an equity index or equity swap, option,
spread, future, or forward agreement; a debt index or debt
swap, option, future, or forward agreement; a credit swap,
option, future, or forward agreement; a commodity index or
commodity swap, option, future, or forward agreement; or a
weather swap, weather derivative, or a weather option.'' This
amendment would achieve contractual netting across economically
similar over-the-counter products that can be terminated and
closed out on a mark-to-market basis.
Subsection (g) amends the FDIA by adding a definition for
``transfer,'' which is a key term used in the FDIA, to ensure
that it is broadly construed to encompass dispositions of
property or interests in property. The definition tracks that
in section 101 of the Bankruptcy Code.
Subsection (h) makes clarifying technical changes to
conform the receivership and conservatorship provisions of the
FDIA. This subsection (h) also clarifies that the FDIA
expressly protects rights under security agreements,
arrangements or other credit enhancement related to one or more
qualified financial contracts (QFCs). An example of a security
arrangement is a right of set off, and examples of other credit
enhancements are letters of credit, guarantees, reimbursement
obligations and other similar agreements.
Subsection (i) clarifies that no provision of Federal or
state law relating to the avoidance of preferential or
fraudulent transfers (including the anti-preference provision
of the National Bank Act) can be invoked to avoid a transfer
made in connection with any QFC of an insured depository
institution in conservatorship or receivership, absent actual
fraudulent intent on the part of the transferee.
Section 3. Authority of the corporation with respect to failed and
failing institutions
Section 3 provides that no provision of law, including
FDICIA, shall be construed to limit the power of the FDIC to
transfer or to repudiate any QFC in accordance with its powers
under the FDIA. As discussed below, there has been some
uncertainty regarding whether or not FDICIA limits the
authority of the FDIC to transfer or to repudiate QFCs of an
insolvent financial institution. Section 3--as well as other
provisions in the Act--clarify that FDICIA does not limit the
transfer powers of the FDIC with respect to QFCs.
Section 3 denies enforcement to ``walkaway'' clauses in
QFCs. A walkaway clause is defined as a provision that, after
calculation of a value of a party's position or an amount due
to or from one of the parties upon termination, liquidation or
acceleration of the QFC, 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 non-defaulting party.
Section 4. Amendments relating to transfers of qualified financial
contracts
Subsection (a) amends the FDIA to expand the transfer
authority of the FDIC to permit transfers of QFCs to
``financial institutions'' as defined in FDICIA or in
regulations. This provision will allow the FDIC to transfer
QFCs to a non-depository financial institution, provided the
institution is not subject to bankruptcy or insolvency
proceedings.
The new FDIA provision specifies that when the FDIC
transfers QFCs that are subject to the rules of a particular
clearing organization, the transfer will not require the
clearing organization to accept the transferee as a member of
the organization. This provision gives the FDIC flexibility in
resolving QFCs subject to the rules of a clearing organization,
while preserving the ability of such organizations to enforce
appropriate risk reducing membership requirements.
The new FDIA provision also permits transfers to an
eligible financial institution that is a non-U.S. person, or
the branch or agency of a non-U.S. person if, following the
transfer, the contractual rights of the parties would be
enforceable substantially to the same extent as under the FDIA.
Subsection (b) amends the notification requirements
following a transfer of the QFCs of a failed depository
institution to require the FDIC to notify any party to a
transferred QFC of such transfer by 5:00 p.m. (Eastern Time) on
the business day following the date of the appointment of the
FDIC acting as receiver or following the date of such transfer
by the FDIC acting as a conservator. This amendment is
consistent with the policy statement on QFCs issued by the FDIC
on December 12, 1989.
Subsection (c) amends the FDIA to clarify the relationship
between the FDIA and FDICIA. There has been some uncertainty
whether FDICIA permits counter parties to terminate or
liquidate a QFC before the expiration of the time period
provided by the FDIA during which the FDIC may repudiate or
transfer a QFC in a conservatorship or receivership. Subsection
(c) provides that a party may not terminate a QFC based solely
on the appointment of the FDIC as receiver until 5:00 p.m.
(Eastern Time) on the business day following the appointment of
the receiver or after the person has received notice of a
transfer under FDIA section 11(d)(9), or based solely on the
appointment of the FDIC as conservator, notwithstanding the
provisions of FDICIA. This provides the FDIC with an
opportunity to undertake an orderly resolution of the insured
depository institution.
The amendment also prohibits the enforcement of rights of
termination or liquidation that are based solely on the
``financial condition'' of the depository institution in
receivership or conservatorship. For example, termination based
on a cross-default provision in a QFC that is triggered upon a
default under another contract could be stayed if such other
default was caused by an acceleration of amounts due under that
other contract, and such acceleration was based solely on the
appointment of a conservator or receiver for that depository
institution. Similarly, a provision in a QFC permitting
termination of the QFC based solely on a downgraded credit
rating of a party will not be enforceable in an FDIC
receivership or conservatorship because the provision is based
solely on the financial condition of the depository institution
in default. However, any payment, delivery or other
performance-based default, or breach of a representation or
covenant putting in question the enforceability of the
agreement, will not be deemed to be based solely on financial
condition for purposes of this provision. The amendment is not
intended to prevent counter parties from taking all actions
permitted and recovering all damages authorized upon
repudiation of any QFC by a conservator or receiver.
The amendment allows the FDIC to meet its obligation to
provide notice to parties to transferred QFCs by taking steps
reasonably calculated to provide notice to such parties by the
required time. This is consistent with the existing policy
statement on QFCs issued by the FDIC on December 12, 1989.
Finally, the amendment permits the FDIC to transfer QFCs of
a failed depository institution to a bridge bank or a
depository institution organized by the FDIC for which a
conservator is appointed either (i) immediately upon the
organization of such institution or (ii) at the time of a
purchase and assumption transaction between the FDIC and the
institution. This provision clarifies that such institutions
are not to be considered financial institutions that are
ineligible to receive such transfers under FDIA section
11(e)(9). This is consistent with the existing policy statement
on QFCs issued by the FDIC on December 12, 1989.
Section 5. Amendments relating to disaffirmance or repudiation of
qualified financial contracts
Section 5 limits the disaffirmance and repudiation
authority of the FDIC with respect to QFCs so that such
authority is consistent with the FDIC's transfer authority
under FDIA section 11(e)(9). This ensures that no
disaffirmance, repudiation or transfer authority of the FDIC
may be exercised to ``cherry-pick'' or otherwise treat
independently all the QFCs between a depository institution in
default and a person or any affiliate of such person. The FDIC
has announced that its policy is not to repudiate or disaffirm
QFCs selectively. This unified treatment is fundamental to the
reduction of systemic risk.
Section 6. Clarifying amendment relating to master agreements
Section 6 states that a master agreement for one or more
securities contracts, commodity contracts, forward contracts,
repurchase agreements or swap agreements will be treated as a
single QFC under the FDIA. This provision ensures that cross-
product netting pursuant to a master agreement will be
enforceable under the FDIA. Cross-product netting permits a
wide variety of financial transactions between two parties to
be netted, thereby maximizing the present and potential future
risk-reducing benefits of the netting arrangement between the
parties. Express recognition of the enforceability of such
cross-product master agreements furthers the policy of
increasing legal certainty and reducing systemic risks in the
case of an insolvency of a large financial participant. Similar
Bankruptcy Code clarifications to recognize cross-product
netting both under a master agreement and in the absence of a
master agreement are described below.
Section 7. Federal Deposit Insurance Corporation Improvement Act of
1991
Subsection (a)(1) amends the definition of ``clearing
organization'' to include clearinghouses that are subject to
exemptions pursuant to orders of the SEC or the CFTC.
Subsection (a)(2). FDICIA provides that a netting
arrangement will be enforced pursuant to its terms,
notwithstanding the failure of a party to the agreement.
However, the current netting provisions of FDICIA limit this
protection to ``financial institutions,'' which include
depository institutions. Subsection (a)(2) amends the FDICIA
definition of covered institutions to include (i) uninsured
national and State member banks, irrespective of their
eligibility for deposit insurance and (ii) foreign banks
(including the foreign bank and its branches or agencies as a
combined group, or only the foreign bank parent of a branch or
agency). The Federal Reserve Board already has by regulation
included certain foreign banks in the definition of a
``financial institution'' for purposes of FDICIA and the latter
change will statutorily extend the protections of FDICIA to
ensure that U.S. financial organizations participating in
netting agreements with foreign banks are covered by the Act,
thereby enhancing the safety and soundness of these
arrangements.
Subsection (a)(3) amends FDICIA to provide that, for
purposes of FDICIA, two or more clearing organizations that
enter into a netting contract are considered ``members'' of
each other. This assures the enforceability of netting
arrangements involving two or more clearing organizations and a
member common to all such organizations, thus reducing systemic
risk in the event of the failure of such a member. Under the
current FDICIA provisions, the enforceability of such
arrangements depends on a case-by-case determination that
clearing organizations could be regarded as members of each
other for purposes of FDICIA.
Subsection (a)(4) amends the FDICIA definition of netting
contract and the general rules applicable to netting contracts.
The current FDICIA provisions require that the nettingagreement
must be governed by the law of the United States or a State to receive
the protections of FDICIA. However, many of these agreements,
particularly netting arrangements covering positions taken in foreign
exchange dealings, are governed by the laws of a foreign country. This
subsection broadens the definition of ``netting contract'' to include
those agreements governed by foreign law, and preserves the FDICIA
requirement that a netting contract is not invalid under, or precluded
by, Federal law.
Subsection (a)(5) adds a definition of ``payment'' to
FDICIA.
Subsections (b) and (c) establish two exceptions to
FDICIA's protection of the enforceability of the provisions of
netting contracts between financial institutions and among
clearing organization members.
First, the termination provisions of netting contracts will
not be enforceable based solely on (i) the appointment of a
conservator for an insolvent depository institution under the
FDIA or (ii) the appointment of a receiver for such institution
under the FDIA, if such receiver transfers or repudiates QFCs
in accordance with the FDIA and gives notice of a transfer by
5:00 p.m. on the business day following the appointment of a
receiver. This change is made to confirm the FDIC's flexibility
to transfer or repudiate the QFCs of an insolvent depository
institution in accordance with the terms of the FDIA. This
modification also provides important legal certainty regarding
the treatment of QFCs under the FDIA, because the current
relationship between the FDIA and FDICIA is unclear.
The second exception provides that FDICIA does not override
a stay order under SIPA with respect to foreclosure on
securities (but not cash) collateral of a debtor (section 12
makes a conforming change to SIPA). There is also an exception
relating to insolvent commodity brokers.
Subsections (b) and (c) also clarify that a security
agreement or other credit enhancement related to a netting
contract is enforceable to the same extent as the underlying
netting contract.
Subsection (d) adds a new section 407 to FDICIA. This new
section provides that, notwithstanding any other law, QFCs with
uninsured national banks or uninsured Federal branches or
agencies that are placed in receivership or conservatorship
will be treated in the same manner as if the contract were with
an insured national bank or insured Federal branch for which a
receiver or conservator was appointed. This provision will
ensure that parties to QFCs with uninsured national banks or
uninsured Federal branches or agencies will have the same
rights and obligations as parties entering into the same
agreements with insured depository institutions. The new
section also specifically limits the powers of a receiver or
conservator for an uninsured national bank or uninsured Federal
branch or agency to those contained in 12 U.S.C.
Sec. Sec. 1821(e)(8), (9), (10), and (11), which address QFCs.
While the amendment would apply the same rules to uninsured
national banks and Federal branches and agencies that apply to
insured institutions, the provision would not change the rules
that apply to insured institutions. Nothing in this section
would amend the International Banking Act, the Federal Deposit
Insurance Act, the National Bank Act, or other statutory
provisions with respect to receiverships of insured national
banks or Federal branches.
Section 8. Bankruptcy Code amendments
Subsection (a)(1) amends the Bankruptcy Code definitions of
``repurchase agreement'' and ``swap agreement'' to conform with
the amendments to the FDIA contained in sections 2(e) and 2(f)
of the Act.
In connection with the definition of ``repurchase
agreement,'' the term ``qualified foreign government
securities'' is defined to include securities that are direct
obligations of, or fully guaranteed by, central governments of
members of the Organization for Economic Cooperation and
Development (OECD). This language reflects developments in the
repurchase agreement markets, which increasingly use foreign
government securities as the underlying asset. Any risk
presented by this modification is addressed by limiting it to
those obligating or guaranteed by OECD member states.
Subsection (a)(1) specifies that repurchase obligations
under a participation in an commercial mortgage loan do not
make the participation agreement a ``repurchase agreement.''
Such repurchase obligations embedded in participations in
commercial loans (such as recourse obligations) do not
constitute a ``repurchase agreement.'' However, a repurchase
agreement involving the transfer of participations in
commercial mortgage loans with a simultaneous agreement to
repurchase the participation on demand or at a date certain one
year or less after such transfer would constitute a
``repurchase agreement.''
The amendments to the definition of ``repurchase
agreement'' are not intended to affect the interpretation of
the definition of ``securities contract.''
The definition of ``swap agreement,'' in conjunction with
the addition of ``spot foreign exchange transactions'' that was
added to the definition in 1994, will achieve contractual
netting across economically similar over-the-counter products
that can be terminated and closed out on a mark-to-market
basis.
The definition of ``swap agreement'' originally was
intended to provide sufficient flexibility to avoid the need to
amend the definition as the nature and uses of swap
transactions matured. For that reason, the phrase ``or any
other similar agreement'' was included in the definition. To
clarify this, subsection (a)(1) expands the definition of
``swap agreement'' to include ``any agreement or transaction
similar to any other agreement or transaction referred to in
[subsection (a)(1)] that is presently, or in the future
becomes, regularly entered into in the swap market [. . .] and
is a forward, swap, future, or option on one or more rates,
currencies, commodities, equity securities or other equity
instruments, debt securities or other debt instruments, or
economic indices or measures of economic risk or value.''
Subsection (a)(1) specifies that this definition of swap
agreement applies only for purposes of the Bankruptcy Code and
is inapplicable to the other statutes, rules and regulations
enumerated in that section.
The definition also includes any security agreement or
arrangement, or other credit enhancement, related to a swap
agreement. This ensures that any such agreement, arrangement or
enhancement is itself deemed to be a swap agreement, and
therefore eligible for treatment as such for purposes of
termination, liquidation, acceleration, offset and netting
under the Bankruptcy Code and the FDIA. Similar changes are
made in the definitions of ``forward contract,'' ``commodity
contract'' and ``repurchase agreement.'' An example of a
security arrangement is a right of setoff; examples of other
credit enhancements are letters of credit, guarantees,
reimbursement obligations and other similar agreements.
Subsections (a)(2) and (a)(3) amend the Bankruptcy Code
definitions of ``securities contract'' and ``commodity
contract,'' respectively, to conform them to the definitions in
the FDIA, and also to include any security agreements or
arrangements or other credit enhancements related to one or
more such contracts. Subsection (a)(2), like the amendments to
the FDIA, amends the definition of ``securities contract'' to
encompass options on securities and margin loans. The inclusion
of ``margin loans'' in the definition is intended to encompass
only those loans commonly known in the securities industry as
``margin loans'' and does not include other loans utilizing
securities as collateral, however documented.
Subsection (a)(2) also specifies that purchase, sale and
repurchase obligations under a participation in a commercial
mortgage loan do not constitute ``securities contracts.'' While
a contract for the purchase or sale or a participation may
constitute a ``securities contract'', the purchase, sale or
repurchase obligation embedded in a participation agreement
does not make that agreement a ``securities contract.''
Subsection (b) amends the Bankruptcy Code definitions of
``financial institution'' and ``forward contract merchant.''
The definition for ``financial institution'' includes Federal
Reserve Banks and the receivers or conservators of insolvent
depository institutions.
Subsection (b) also adds a new definition of ``financial
participant'' to limit the potential impact of insolvencies
upon other major market participants. This definition will
allow such marketparticipants to close-out and net agreements
with insolvent entities under sections 362(b)(6), 546, 548, 555, and
556 even if the creditor could not qualify as, for example, a commodity
broker. The new subsection preserves the limitations of the right to
close-out and net such contracts, in most cases, to entities who
qualify under the Bankruptcy Code's counter party limitations. However,
where the counter party has transactions with a total gross dollar
value of at least $1 billion in notional principal amount outstanding
on any day during the previous 15-month period, or has gross mark-to-
market positions of at least $100 million (aggregated across counter
parties) in one or more agreements or transactions on any day during
the previous 15-month period, the new subsection and corresponding
amendments would permit it to exercise netting rights irrespective of
its inability otherwise to satisfy those counter party limitations.
This change will help prevent systemic impacts upon the markets from a
single failure.
Subsection (c) adds to the Bankruptcy Code new definitions
for the terms ``master netting agreement'' and ``master netting
agreement participant.'' The definition of ``master netting
agreement'' is designed to protect the termination and close-
out netting provisions of cross-product master agreements
between parties. Such an agreement may be used (i) to document
a wide variety of securities contracts, commodity contracts,
forward contracts, repurchase agreements and swap agreements or
(ii) as an umbrella agreement for separate master agreements
between the same parties, each of which is used to document a
discrete type of transaction. The definition includes security
agreements or arrangements or other credit enhancements related
to one or more such agreements and clarifies that a master
netting agreement will be treated as such even if it documents
transactions that are not within the enumerated categories of
qualifying transactions (but the provisions of the Bankruptcy
Code relating to master netting agreements and the other
categories of transactions will not apply to such other
transactions).
A ``master netting agreement participant'' is any entity
that is a party to an outstanding master netting agreement with
a debtor before the filing of a bankruptcy petition.
Subsection (d) amends section 362(b) of the Bankruptcy Code
to protect enforcement, free from the automatic stay, of setoff
or netting provisions in swap agreements and in master netting
agreements and security agreements or arrangements related to
one or more swap agreements or master netting agreements. This
provision parallels the other provisions of the Bankruptcy Code
that protect netting provisions of securities contracts,
commodity contracts, forward contracts, and repurchase
agreements. Because the relevant definitions include related
security agreements, the reference to ``setoff'' in this
provisions, as well as in section 362(b)(6) and (7) of the
Bankruptcy Code, are intended to refer also to rights to
foreclose on, and to set off against, obligations to return
collateral securing swap agreements, master netting
arrangements, repurchase agreements, securities contracts,
commodity contracts, or forward contracts. Collateral may be
pledged to cover the cost of replacing the defaulted
transactions in the relevant market, as well as other costs and
expenses incurred or estimated to be incurred for the purpose
of hedging or reducing the risks arising out of such
termination. Enforcement of these agreements and arrangements
is consistent with the policy goal of minimizing systemic risk.
Subsection (d) also clarifies that the provisions
protecting setoff and foreclosure in relation to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, and master netting agreements free
from the automatic stay apply to collateral pledged by the
debtor that is under the control of the creditor but that
cannot technically be ``held by'' the creditor, such as
receivables and book-entry securities, and to collateral that
has been repledged by the creditor.
Subsection (e) amends section 546 of the Bankruptcy Code to
provide that transfers made under or in connection with a
master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay
or defraud. This section of the Act also clarifies the
limitations on a trustee's power to avoid transfers made under
swap agreements.
Subsection (f) amends section 548(d) of the Bankruptcy Code
to provide that transfers made under or in connection with a
master netting agreement may not be avoided by a trustee except
where such transfer is made with actual intent to hinder, delay
or defraud. This amendment provides the same protections for
transfers made under, or in connection with, master netting
agreements as currently is provided for margin payments and
settlement payments received by commodity brokers, forward
contract merchants, stockbrokers, financial institutions,
securities clearing agencies, repo participants, and swap
participants under sections 546 and 548(d).
Subsections (g), (h), (i) and (j) clarify that the
provisions of the Bankruptcy Code that protect (i) rights of
liquidation under securities contracts, commodity contracts,
forward contracts and repurchase agreements also protect rights
of termination or acceleration under such contracts, and (ii)
rights to terminate under swap agreements also protect rights
of liquidation and acceleration.
Subsection (k) adds a new section 561 to the Bankruptcy
Code to protect the contractual right of a master netting
agreement participant to enforce any rights of termination,
liquidation, acceleration, offset or netting under a master
netting agreement. Such rights include rights arising (i) from
the rules of a securities exchange or clearing organization,
(ii) under common law, law merchant or (iii) by reason of
normal business practice. This is consistent with the current
treatment of rights under swap agreements under section 560 of
the Bankruptcy Code.
For the purposes of Bankruptcy Code sections 555, 556, 559,
560 and 561, it is intended that the normal business practice
in the event of a default of a party based on bankruptcy or
insolvency is to terminate, liquidate or accelerate securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements and master netting agreements with
the bankrupt or insolvent party.
The protection of netting and offset rights in sections 560
and 561 is in addition to the protections afforded in sections
362(b)(6), (b)(7), (b)(17) and (b)(32). For example, cross-
product netting will be protected from the automatic stay under
section 561 even in the absence of a master netting agreement.
Sections 561(b)(2) and (3) limit the exercise of
contractual rights to net or to offset obligations where one
leg of the obligations sought to be netted relates to commodity
contracts. Under subsection (b)(2), netting or offset is not
permitted if the obligations are not mutual. This means, for
example, that proprietary obligations cannot be netted or
offset against obligations held for, or on behalf of, some
other party. Even if the obligations are mutual, under
subsection (b)(3) netting or offset is not permitted in a
commodity broker bankruptcy if the party seeking to net or to
offset has no positive net equity in the commodity account at
the debtor. Subsections (b)(2) and (b)(3) limit the depletion
of assets available for distribution to customers of commodity
brokers. This is consistent with the principle of Subchapter IV
of Chapter 7 of the Bankruptcy Code, which gives priority to
customer claims in the bankruptcy of a commodity broker.
Under the Act, the termination, liquidation or acceleration
rights of a master netting agreement participant are subject to
limitations contained in other provisions of the Bankruptcy
Code relating to securities contracts and repurchase
agreements. In particular, if a securities contract or
repurchase agreement is documented under a master netting
agreement, a party's termination, liquidation and acceleration
rights would be subject to the provisions of the Bankruptcy
Code relating to orders authorized under the provisions of SIPA
or any statute administered by the SEC. In addition, the
netting rights of a party to a master netting agreement would
be subject to any contractual terms between the parties
limiting or waiving netting or set off rights. Similarly, a
waiver by a bank or a counter party of netting or set off
rights in connection with QFCs would be enforceable under the
FDIA.
Subsection (l) clarifies that, with respect to municipal
bankruptcies, all the provisions of the Bankruptcy Code
relating to securities contracts, commodity contracts, forward
contracts, repurchase agreements, swap agreements and master
netting agreements (which by their terms are intended to apply
in all proceedings under title 11) will apply in a Chapter 9
proceeding for a municipality. Although sections 555. 556, 559
and 560 provide that they apply in any proceeding under the
Bankruptcy Code, this subsection makes a technical amendment in
Chapter 9 to clarify the applicability of these provisions.
Subsection (m) clarifies that the provisions of the
Bankruptcy Code related to securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap
agreements and master netting agreements apply in a section 304
proceeding ancillary to a foreign insolvency proceeding.
Subsections (n) and (o) amend those provisions in the
Bankruptcy Code concerning the liquidation of commodity brokers
and stockbrokers. Subchapter III of Chapter 7 of the Bankruptcy
Code details specific rules for the liquidation of
stockbrokers. Subchapter IV of Chapter 7 of the Bankruptcy Code
and regulations of the CFTC detail specific rules for the
liquidation of commodity brokers. These authorities are
designed to protect customers and customer property of an
insolvent stockbroker or commodity broker.
Subsections (n) and (o) clarify the rights of parties to
commodity contracts, securities contracts, forward contracts,
swap agreements, repurchase agreements and master netting
agreements with an insolvent commodity broker or stockbroker.
They ensure that non-customers will not defeat the priority
scheme of Subchapter III or IV priority by gaining access to
assets held in segregated customer accounts. The subsections
also clarify that the exercise of termination and netting
rights will not otherwise affect customer property or
distributions by the trustee of the insolvent commodity broker
or stockbroker after the exercise of such rights.
Subsection (p) amends section 553 of the Bankruptcy Code to
clarify that the acquisition by a creditor of setoff rights in
connection with swap agreements, repurchase agreements,
securities contracts, forward contracts, commodity contracts
and master netting agreements cannot be avoided as a
preference.
This subsection also adds setoff of the kinds described in
sections 555, 556, 559, 560, and 561 of the Bankruptcy Code to
the types of set off excepted from section 553(b).
Section 9. Recordkeeping requirements
Section 9 amends section 11(e)(8) of the Federal Deposit
Insurance Act to explicitly authorize the FDIC, in consultation
with appropriate Federal banking agencies, to prescribe
regulations on recordkeeping with respect to QFCs. Adequate
recordkeeping for such transactions is essential to effective
risk management and to the reduction of systemic risk permitted
by the orderly resolution of depository institutions utilizing
QFCs.
Section 10. Exemptions from contemporaneous execution requirement
Section 10 amends FDIA section 13(e)(2) to provide that an
agreement for the collateralization of governmental deposits,
bankruptcy estate funds, Federal Reserve Bank or Federal Home
Loan Bank extensions of credit or one or more QFCs shall not be
deemed invalid solely because such agreement was not entered
into contemporaneously with the acquisition of the collateral
or because of pledges, delivery or substitution of the
collateral made in accordance with such agreement.
The amendment codifies portions of policy statements issued
by the FDIC regarding the application of section 13(e), which
codifies the ``D'Oench Duhme'' doctrine. With respect to QFCs,
this codification recognizes that QFCs often are subject to
collateral and other security arrangements that may require
posting and return of collateral on an ongoing basis based on
the mark-to-market values of the collateralized transactions.
The codification of only portions of the existing FDIC policy
statements on these and related issues should not give rise to
any negative implication regarding the continued validity of
these policy statements.
Section 11. Damage measure
Section 11 adds a new section 562 to the Bankruptcy Code
providing that damages under any swap agreement, securities
contract, forward contract, commodity contract, repurchase
agreement or master netting agreement will be calculated as of
the earlier of (i) the date of rejection of such agreement by a
trustee or (ii) the date of liquidation, termination or
acceleration of such contract or agreement.
New section 562 provides important legal certainty and
makes the Bankruptcy Code consistent with the current
provisions related to the timing of the calculation of damages
under QFCs in the FDIA.
Section 12. SIPC stay
Section 12 amends SIPA to provide that an order or decree
issued pursuant to SIPA shall not operate as a stay of any
right of liquidation, termination, acceleration, offset or
netting under one or more securities contracts, commodity
contracts, forward contracts, repurchase agreements, swap
agreements or master netting agreements (as defined in the
Bankruptcy Code and including rights of foreclosure on
collateral), except that such order or decree may stay any
right to foreclose on securities (but not cash) collateral
pledged by the debtor or sold by the debtor under a repurchase
agreement (a corresponding amendment to FDICIA is made by
section 7). A creditor that was stayed in exercising rights
against securities collateral would be entitled to post-
insolvency interest to the extent of the collateral.
Section13. Asset-backed securitizations
Section 13 amends section 541 of the Bankruptcy Code to
provide that certain assets transferred to an eligible entity
in connection with an asset-backed securitization generally
will not be included within the bankruptcy estate of the
debtor. This provision recognizes that a valid transfer of such
assets to an ``eligible entity'', generally eliminates the
debtor's legal or equitable interests in those assets.
Accordingly, subject to the avoidance powers in section 548(a),
the transfer will be treated as a sale of those assets not
subject to avoidance.
Section 14. Application of amendments
Section 14 provides that the amendments made by the Act
shall not apply with respect to cases commenced, or to
conservator/receiver appointments made, before the date of
enactment.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
FEDERAL DEPOSIT INSURANCE ACT
* * * * * * *
Sec. 11. (a) * * *
* * * * * * *
(e) Provisions Relating to Contracts Entered Into Before
Appointment of Conservator or Receiver.--
(1) * * *
* * * * * * *
(8) Certain qualified financial contracts.--
(A) Rights of parties to contracts.--Subject
to [paragraph (10)] paragraphs (9) and (10) of
this subsection and notwithstanding any other
provision of this Act (other than subsection
(d)(9) of this section and section 13(e)), any
other Federal law, or the law of any State, no
person shall be stayed or prohibited from
exercising--
(i) any right [to cause the
termination or liquidation] such person
has to cause the termination,
liquidation, or acceleration of any
qualified financial contract with an
insured depository institution which
arises upon the appointment of the
Corporation as receiver for such
institution at any time after such
appointment;
[(ii) any right under any security
arrangement relating to any contract or
agreement described in clause (i); or]
(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);
* * * * * * *
(C) Certain transfers not avoidable.--
(i) In general.--Notwithstanding
paragraph [(11)] (12), section 5242 of
the Revised Statutes of the United
States (12 U.S.C. 91) or any other
Federal or State law relating to the
avoidance of preferential or fraudulent
transfers, the Corporation, whether
acting as such or as conservator or
receiver of an insured depository
institution, may not avoid any transfer
of money or other property in
connection with any qualified financial
contract with an insured depository
institution.
* * * * * * *
(D) Certain contracts and agreements
defined.--For purposes of this subsection--
(i) Qualified financial contract.--
The term ``qualified financial
contract'' means any securities
contract, commodity contract, forward
contract, repurchase agreement, swap
agreement, and any similar agreement
that the Corporation determines by
regulation, resolution or order to be a
qualified financial contract for
purposes of this paragraph.
[(ii) Securities contract.--The term
``securities contract''--
[(I) has the meaning given to
such term in section 741 of
title 11, United States Code,
except that the term
``security'' (as used in such
section) shall be deemed to
include any mortgage loan, any
mortgage-related security (as
defined in section 3(a)(41) of
the Securities Exchange Act of
1934), and any interest in any
mortgage loan or mortgage-
related security; and
[(II) does not include any
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term.
[(iii) Commodity contract.--The term
``commodity contract'' has the meaning
given to such term in section 761 of
title 11, United States Code.
[(iv) Forward contract.--The term
``forward contract'' has the meaning
given to such term in section 101 of
title 11, United States Code.
[(v) Repurchase agreement.--The term
``repurchase agreement''--
[(I) has the meaning given to
such term in section 101 of
title 11, the United States
Code, except that the items (as
described in such section)
which may be subject to any
such agreement shall be deemed
to include 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; and
[(II) does not include any
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term.
[(vi) Swap agreement.--The term
``swap agreement''--
[(I) means any agreement,
including the terms and
conditions incorporated by
reference in any such
agreement, which is a rate swap
agreement, basis swap,
commodity swap, forward rate
agreement, interest rate
future, interest rate option
purchased, forward foreign
exchange agreement, rate cap
agreement, rate floor
agreement, rate collar
agreement, currency swap
agreement, cross-currency rate
swap agreement, currency
future, or currency option
purchased or any other similar
agreement, and
[(II) includes any
combination of such agreements
and any option to enter into
any such agreement.
[(vii) Treatment of master agreement
as 1 swap agreement.--Any master
agreement for any agreements described
in clause (vi)(I) together with all
supplements to such master agreement
shall be treated as 1 swap agreement.
[(viii) Transfer.--The term
``transfer'' has the meaning given to
such term in section 101 of title 11,
United States Code.]
(ii) Securities contract.--The term
``securities contract''--
(I) means a contract for the
purchase, sale, or loan of a
security, a certificate of
deposit, a mortgage loan, or
any interest in a mortgage
loan, a 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 any
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) does not include any
purchase, sale, or repurchase
obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
agreement 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, certificates
of deposit, mortgage loans or
interests therein, 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, certificate of
deposit, loan, interest, group
or index, or option;
(V) means any margin loan;
(VI) means any other
agreement or transaction that
is similar to any agreement or
transaction referred to in this
clause;
(VII) means any combination
of the agreements or
transactions referred to in
this clause;
(VIII) means any option to
enter into any agreement or
transaction referred to in this
clause;
(IX) means a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (III), (IV),
(V), (VI), (VII), or (VIII),
together with all supplements
to any such master agreement,
without 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 considered
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), (III), (IV),
(V), (VI), (VII), or (VIII);
and
(X) means any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in this
clause.
(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 futures 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 purchase or
sale of a commodity for future
delivery on, or subject to the
rules of, a contract market or
board of trade that is cleared
by such clearing organization,
or commodity option traded on,
or subject to the rules of, a
contract market or board of
trade that is cleared by such
clearing organization;
(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
transaction referred to in
subclause (I), (II), (III),
(IV), (V), (VI), (VII), or
(VIII), together with all
supplements to any such master
agreement, without regard to
whether the master agreement
provides for an agreement or
transaction that is not a
commodity contract under this
clause, except that the master
agreement shall be considered
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) any security agreement or
arrangement or other credit
enhancement related to any
agreement or transaction
referred to in this clause.
(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
transaction, reverse repurchase
transaction, consignment,
lease, swap, hedge transaction,
deposit, loan, option,
allocated transaction,
unallocated transaction, or any
other similar agreement;
(II) any combination of
agreements 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
transaction referred to in
subclause (I), (II), or (III),
together with all supplements
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
considered to be a forward
contract under this clause only
with respect to each agreement
or transaction under the master
agreement that is referred to
in subclause (I), (II), or
(III); or
(V) any security agreement or
arrangement or other credit
enhancement related to any
agreement or transaction
referred to in subclause (I),
(II), (III), or (IV).
(v) Repurchase agreement.--The term
``repurchase agreement'' (which
definition also applies to the term
``reverse repurchase agreement'')--
(I) means an agreement,
including related terms, which
provides for the transfer of 1
or more certificates of
deposit, mortgage-related
securities (as such term is
defined in the Securities
Exchange Act of 1934), mortgage
loans, interests in mortgage-
related securities or mortgage
loans, eligible bankers'
acceptances, qualified foreign
government securities or
securities that are direct
obligations of, or that are
fully guaranteed 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, securities, loans,
or interests with a
simultaneous agreement by such
transferee to transfer to the
transferor thereof certificates
of deposit, eligible bankers'
acceptances, securities, 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;
(II) does not include any
repurchase obligation under a
participation in a commercial
mortgage loan unless the
Corporation determines by
regulation, resolution, or
order to include any such
participation within the
meaning of such term;
(III) means any combination
of agreements or transactions
referred to in subclauses (I)
and (IV);
(IV) means any option to
enter into any agreement or
transaction referred to in
subclause (I) or (III);
(V) means a master agreement
that provides for an agreement
or transaction referred to in
subclause (I), (III), or (IV),
together with all supplements
to any such master agreement,
without regard to whether the
master agreement provides for
an agreement or transaction
that is not a repurchase
agreement under this clause,
except that the master
agreement shall be considered
to be a repurchase agreement
under this subclause only with
respect to each agreement or
transaction under the master
agreement that is referred to
in subclause (I), (III), or
(IV); and
(VI) means any security
agreement or arrangement or
other credit enhancement
related to any agreement or
transaction referred to in
subclause (I), (III), (IV), or
(V).
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 central government
of a member of the Organization for
Economic Cooperation and Development
(as determined by regulation or order
adopted by the appropriate Federal
banking authority).
(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,
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 or precious metals
agreement; a currency swap,
option, future, or forward
agreement; an equity index or
equity swap, option, future, or
forward agreement; 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; or a weather
swap, weather derivative, or a
weather option;
(II) any agreement or
transaction similar to any
other agreement or transaction
referred to in this clause that
is presently, or in the future
becomes, regularly entered into
in the swap market (including
terms and conditions
incorporated by reference in
such agreement) and that is a
forward, swap, future, or
option on 1 or more rates,
currencies, commodities, equity
securities or other equity
instruments, debt securities or
other debt instruments, or
economic indices or measures of
economic risk or value;
(III) any combination of
agreements 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
transaction referred to in
subclause (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 not a swap
agreement under this clause,
except that the master
agreement shall be considered
to be a swap agreement under
this clause only with respect
to each agreement or
transaction 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
enhancement related to any
agreements or transactions
referred to in subparagraph
(I), (II), (III), (IV), or (V).
Such term is applicable for purposes of
this title only and shall not be
construed or applied so as to challenge
or affect the characterization,
definition, or treatment of any swap
agreement 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 promulgated by the
Securities and Exchange Commission or
the Commodity Futures Trading
Commission.
(vii) Treatment of master agreement
as 1 agreement.--Any master agreement
for any contract or agreement described
in any preceding clause of this
subparagraph (or any master agreement
for such master agreement or
agreements), 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 qualified financial
contract only with respect to those
transactions that are themselves
qualified financial contracts.
(viii) Transfer.--The term
``transfer'' means every mode, direct
or indirect, absolute or conditional,
voluntary or involuntary, of disposing
of or parting with property or with an
interest in property, including
retention of title as a security
interest and foreclosure of the
depository institutions's equity of
redemption.
(E) Certain protections in event of
appointment of conservator.--Notwithstanding
any other provision of this Act ([other than
paragraph (12) of this subsection, subsection
(d)(9)] other than subsections (d)(9) and
(e)(10) of this section, and section 13(e) of
this Act), any other Federal law, or the law of
any State, no person shall be stayed or
prohibited from exercising--
(i) any right such person has to
cause the termination, liquidation, or
acceleration of any qualified financial
contract with a depository institution
in a conservatorship based upon a
default under such financial contract
which is enforceable under applicable
noninsolvency law;
[(ii) any right under any security
arrangement relating to such qualified
financial contracts; or]
(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);
* * * * * * *
(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 manner, the
right or power of the Corporation to transfer
any qualified financial contract in accordance
with paragraphs (9) and (10) of this subsection
or to disaffirm or repudiate any such contract
in accordance with paragraph (1).
(G) Walkaway clauses not effective.--
(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and
(E), and sections 403 and 404 of the
Federal Deposit Insurance Corporation
Improvement Act of 1991, no walkaway
clause shall be enforceable in a
qualified financial 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 parties in accordance
with its terms upon termination,
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.
(H) Recordkeeping requirements.--The
Corporation, in consultation with the
appropriate Federal banking agencies, may
prescribe regulations requiring more detailed
recordkeeping with respect to qualified
financial contracts (including market
valuations) by insured depository institutions.
[(9) Transfer of qualified financial contracts.--In
making any transfer of assets or liabilities of a
depository institution in default which includes any
qualified financial contract, the conservator or
receiver for such depository institution shall either--
[(A) transfer to 1 depository institution
(other than a depository institution in
default)--
[(i) all qualified financial
contracts between--
[(I) any person or any
affiliate of such person; and
[(II) the depository
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 depository
institution against such person or any
affiliate of such person under any such
contract; and
[(iv) all property securing any claim
described in clause (ii) or (iii) under
any such contract; or
[(B) transfer none of the financial
contracts, claims, or property referred to in
subparagraph (A) (with respect to such person
and any affiliate of such person).]
(9) Transfer of qualified financial contracts.--
(A) In general.--In making any transfer of
assets or liabilities of a depository
institution in default which includes any
qualified financial 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 bankruptcy, or
other legal custodian has been
appointed or which is otherwise the
subject of a bankruptcy or insolvency
proceeding--
(I) all qualified financial
contracts between any person or
any affiliate of such person
and the depository 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
depository institution against
such person or any affiliate of
such person under any such
contract; and
(IV) all property securing or
any other credit enhancement
for any contract described in
subclause (I) or any claim
described in subclause (II) or
(III) under any such contract;
or
(ii) transfer none of the qualified
financial contracts, claims, property
or other credit enhancement referred to
in clause (i) (with respect to such
person and any affiliate of such
person).
(B) Transfer to foreign bank, foreign
financial institution, or branch or agency of a
foreign bank or financial institution.--In
transferring any qualified financial contracts
and related claims and property pursuant to
subparagraph (A)(i), the conservator or
receiver for such depository institution 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, any security agreement or
arrangement or other credit enhancement related
to 1 or more qualified financial contracts, the
contractual rights of the parties to such
qualified financial contracts, netting
contracts, security agreements or arrangements,
or other credit enhancements are enforceable
substantially to the same extent as permitted
under this section.
(C) Transfer of contracts subject to the
rules of a clearing organization.--In the event
that a conservator or receiver transfers any
qualified financial contract and related
claims, property and credit enhancements
pursuant to subparagraph (A)(i) and such
contract is subject 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 futures commission merchant, or
any other institution as determined by the
Corporation by regulation to be a financial
institution.
(10) Notification of transfer.--
(A) In general.--If--
(i) the conservator or receiver for
an insured depository institution in
default makes any transfer of the
assets and liabilities of such
institution; and
(ii) the transfer includes any
qualified financial contract,
[the conservator or receiver shall use such
conservator's or receiver's best efforts to
notify any person who is a party to any such
contract of such transfer by 12:00, noon (local
time) on the business day following such
transfer] 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.
(B) Certain rights not enforceable.--
(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 Corporation
Improvement Act of 1991 solely by
reason of or incidental to the
appointment of a receiver for the
depository institution (or the
insolvency or financial condition 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 receiver; or
(II) after the person has
received notice that the
contract has been transferred
pursuant to paragraph (9)(A).
(ii) Conservatorship.--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)(E) or section 403 or 404
of the Federal Deposit Insurance
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 institution for which
the conservator has been appointed).
(iii) Notice.--For purposes of this
subsection, the Corporation as receiver
or conservator 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
Corporation has taken steps reasonably
calculated to provide notice to such
person by the time specified in
subparagraph (A) of this subsection.
(C) Treatment of bridge banks.--The following
institutions shall not be considered a
financial institution for which a conservator,
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 paragraph
(9)--
(i) a bridge bank; or
(ii) a depository institution
organized by the Corporation, for which
a conservator is appointed either--
(I) immediately upon the
organization 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.
[(B)] (D) Business day defined.--For purposes
of this paragraph, the term ``business day''
means any day other than any Saturday, Sunday,
or any day on which either the New York Stock
Exchange or the Federal Reserve Bank of New
York is closed.
(11) Disaffirmance or repudiation of qualified
financial contracts.--In exercising the rights of
disaffirmance or repudiation of a conservator or
receiver with respect to any qualified financial
contract to which an insured depository institution is
a party, the conservator or receiver for such
institution shall either--
(A) disaffirm or repudiate all qualified
financial contracts between--
(i) any person or any affiliate of
such person; and
(ii) the depository institution in
default; or
(B) disaffirm or repudiate none of the
qualified financial contracts referred to in
subparagraph (A) (with respect to such person
or any affiliate of such person).
[(11)] (12) Certain security interests not
avoidable.--No provision of this subsection shall be
construed as permitting the avoidance of any legally
enforceable or perfected security interest in any of
the assets of any depository institution except where
such an interest is taken in contemplation of the
institution's insolvency or with the intent to hinder,
delay, or defraud the institution or the creditors of
such institution.
[(12)] (13) Authority to enforce contracts.--
(A) In general.--The conservator or receiver
may enforce any contract, other than a
director's or officer's liability insurance
contract or a depository institution bond,
entered into by the depository institution
notwithstanding any provision of the contract
providing for termination, default,
acceleration, or exercise of rights upon, or
solely by reason of, insolvency or the
appointment or the excercise of rights or
powers of a conservator or receiver.
* * * * * * *
[(13)] (14) Exception for federal reserve and federal
home loan banks.--No provision of this subsection shall
apply with respect to--
(A) any extension of credit from any Federal
home loan bank or Federal Reserve bank to any
insured depository institution; or
* * * * * * *
[(14)] (15) Selling credit card accounts
receivable.--
(A) Notification required.--An
undercapitalized insured depository institution
(as defined in section 38) shall notify the
Corporation in writing before entering into an
agreement to sell credit card accounts
receivable.
* * * * * * *
[(15)] (16) Certain credit card customer lists
protected.--
(A) In general.--If any insured depository
institution sells credit card accounts
receivable under an agreement negotiated at
arm's length that provides for the sale of the
institution's credit card customer list, the
Corporation shall prohibit any party to a
transaction with respect to the institution
under this section or section 13 from using the
list, except as permitted under the agreement.
* * * * * * *
Sec. 13. (a) * * *
* * * * * * *
(e) Agreements Against Interests of Corporation.--
(1) * * *
* * * * * * *
[(2) Public deposits.--An agreement to provide for
the lawful collateralization of deposits of a Federal,
State, or local governmental entity or of any depositor
referred to in section 11(a)(2) shall not be deemed to
be invalid pursuant to paragraph (1)(B) solely because
such agreement was not executed contemporaneously with
the acquisition of the collateral or with any changes
in the collateral made in accordance with such
agreement.]
(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
(A) deposits of, or other credit extension
by, a Federal, State, or local governmental
entity, or of any depositor referred to in
section 11(a)(2), including an agreement to
provide collateral 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
Federal home loan bank; or
(D) 1 or more qualified financial contracts,
as defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph
(1)(B) solely because such agreement was not executed
contemporaneously with the acquisition of the
collateral or because of pledges, delivery, or
substitution of the collateral made in accordance with
such agreement.
* * * * * * *
----------
FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991
* * * * * * *
TITLE IV--MISCELLANEOUS PROVISIONS
Subtitle A--Payment System Risk Reduction
CHAPTER 1--BILATERAL AND CLEARING ORGANIZATION NETTING
* * * * * * *
SEC. 402. DEFINITIONS.
For purposes of this [subtitle] chapter--
(1) * * *
* * * * * * *
(2) Clearing organization.--The term ``clearing
organization'' means a clearinghouse, clearing
association, clearing corporation, or similar
organization--
(A) that provides clearing, netting, or
settlement services for its members and--
(i) in which all members other than
the clearing organization itself are
financial institutions or other
clearing organizations; or
(ii) which is registered as a
clearing agency under the Securities
Exchange Act of 1934 or exempt from
such registration pursuant to an order
of the Securities and Exchange
Commission; or
(B) that performs clearing functions for a
contract market designated pursuant to the
Commodity Exchange Act or that has been
granted an exemption pursuant to section
4(c)(1) of such Act.
* * * * * * *
(6) Depository institution.--The term ``depository
institution'' means--
(A) a depository institution as defined in
section 19(b)(1)(A) of the Federal Reserve Act
(other than clause (vii));
[(B) a branch or agency as defined in section
1(b) of the International Banking Act of 1978;]
(B) an uninsured national bank or an
uninsured State bank that is a member of the
Federal Reserve System if the national bank or
State member bank is not eligible to
makeapplication to become an insured bank under section 5 of the
Federal Deposit Insurance Act;
(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
established the branch or agency, as those
terms are defined in section 1(b) of the
International Banking Act of 1978;
[(C)] (D) a corporation chartered under
section 25(a) of the Federal Reserve Act; or
[(D)] (E) a corporation having an agreement
or undertaking with the Board of Governors of
the Federal Reserve System under section 25 of
the Federal Reserve Act.
* * * * * * *
(11) Member.--The term ``member'' means a member of
or participant in a clearing organization, and includes
the clearing organization and any other clearing
organization with which such clearing organization has
a netting contract.
* * * * * * *
(14) Netting contract.--
(A) In general.--The term ``netting
contract''--
[(i) means a contract or agreement
between 2 or more financial
institutions or members, that--
[(I) is governed by the laws
of the United States, any
State, or any political
subdivision of any State, and
[(II) provides for netting
present or future payment
obligations or payment
entitlements (including
liquidation or close-out values
relating to the obligations or
entitlements) among the parties
to the agreement; and]
(i) means a contract or agreement
between two or more financial
institutions, clearing organizations,
or members that provides for netting
present or future payment obligations
or payment entitlements (including
liquidation or closeout values relating
to such obligations or entitlements)
among the parties to the agreement; and
* * * * * * *
(15) Payment.--The term ``payment'' means a payment
of United States dollars, another currency, or a
composite currency, and a noncash delivery, including a
payment or delivery to liquidate an unmatured
obligation.
* * * * * * *
SEC. 403. BILATERAL NETTING.
[(a) General Rule.--Notwithstanding any other provision of
law, 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 applicable
netting contract.]
(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 section 5(b)(2) of the Securities
Investor Protection Act of 1970), the covered contractual
payment obligations and the covered contractual payment
entitlements between any two financial institutions shall be
netted in accordance with, and subject to the conditions of,
the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States Code).
* * * * * * *
(f) Enforceability of Security Agreements.--The provisions of
any security agreement or arrangement or other credit
enhancement related to 1 or more netting contracts between any
two financial institutions shall be enforceable in accordance
with their terms (except as provided in section 561(b)(2) of
title 11, United States Code) 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
Securities Investor Protection Act of 1970).
SEC. 404. CLEARING ORGANIZATION NETTING.
[(a) General Netting Rule.--Notwithstanding any other
provision of law, the covered contractual payment obligations
and 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 netting contract.]
(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 1970), 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 netting contract (except as provided in section
561(b)(2) of title 11, United States Code).
* * * * * * *
(h) Enforceability of Security Agreements.--The provisions of
any security agreement or arrangement or other credit
enhancement related to 1 or more netting contracts between any
two members of a clearing organization shall be enforceable in
accordance with their terms (except as provided in section
561(b)(2) of title 11, United States Code) 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 Securities Investor Protection Act of 1970).
* * * * * * *
SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND
UNINSURED FEDERAL BRANCHES AND AGENCIES.
(a) In General.--Notwithstanding any other provision of law,
paragraphs (8), (9), (10), 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 receiver''
or ``the receiver or the Corporation'' shall refer to
the receiver of an uninsured national bank or uninsured
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 ``Corporation,
whether acting as such or as conservator or receiver'',
a ``receiver'', or a ``conservator'' shall refer to the
receiver or conservator of an uninsured national bank
or uninsured Federal branch or Federal agency appointed
by the Comptroller of the Currency; and
(3) any reference to an ``insured depository
institution'' 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 conservator of
an uninsured national bank or uninsured Federal 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 institutions 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 promulgating
regulations to implement this section, the Comptroller
of the Currency shall ensure that the regulations
generally are consistent with the regulations and
policies of the Federal Deposit Insurance Corporation
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. [407.] 407A. NATIONAL EMERGENCIES.
The provisions of this subtitle may not be construed to limit
the authority of the President under the Trading With the Enemy
Act (50 U.S.C. App. 1 et seq.) or the International Emergency
Economic Powers Act (50 U.S.C. 1701 et seq.).
* * * * * * *
TITLE 11, UNITED STATES CODE
* * * * * * *
CHAPTER 1--GENERAL PROVISIONS
* * * * * * *
Sec. 101. Definitions
In this title--
(1) * * *
* * * * * * *
[(22) ``financial institution'' means a person that
is a commercial or savings bank, industrial savings
bank, savings and loan association, or trust company
and, when any such person is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741 of this
title, such customer;]
(22) the term ``financial institution''--
(A) means a Federal reserve bank or an entity
(domestic or foreign) that is a commercial or
savings bank, industrial savings bank, savings
and loan association, trust company, a bank or
a corporation organized under section 25A of
the Federal Reserve Act and, when any such bank
or entity is acting as agent or custodian for a
customer in connection with a securities
contract, as defined in section 741, such
customer; and
(B) includes any person described in
subparagraph (A) which operates, or operates
as, a multilateral clearing organization
pursuant to section 409 of the Federal Deposit
Insurance Corporation Improvement Act of 1991;
(22A) ``financial participant'' means an 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 described in paragraph (1), (2), (3),
(4), (5), or (6) of section 561(a) 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
(aggregated across counterparties) in 1 or more such
agreement or transaction with the debtor or any other
entity (other than an affiliate) on any day during the
previous 15-month period;
* * * * * * *
(25) ``forward contract'' [means a contract] means--
(A) a contract (other than a commodity
contract) for the purchase, sale, or transfer
of a commodity, as defined 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
in the forward contract trade, or product or
byproduct thereof, with a maturity date more
than two days after the date the contract is
entered into, including, but not limited to, a
repurchase transaction, reverse repurchase
transaction, consignment, lease, swap, hedge
transaction, deposit, loan, option, allocated
transaction, unallocated transaction[, or any
combination thereof or option thereon;], or any
other similar agreement;
(B) any combination of agreements or
transactions referred to in subparagraphs (A)
and (C);
(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or
(B);
(D) a master agreement that provides for an
agreement or transaction referred to in
subparagraph (A), (B), or (C), together with
all supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a forward contract under this paragraph,
except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement
or transaction under such master agreement that
is referred to in subparagraph (A), (B) or (C);
or
(E) any security agreement or arrangement, or
other credit enhancement related to any
agreement or transaction referred to in
subparagraph (A), (B), (C), or (D), but not to
exceed the actual value of such contract on the
date of the filing of the petition;
[(26) ``forward contract merchant'' means a person
whose business consists in whole or in part of entering
into forward contracts as or with merchants in a
commodity, as defined 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 in the forward contract trade;]
(26) ``forward contract merchant'' means a Federal
reserve bank, or an entity 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, 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;
* * * * * * *
(38A) ``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 described 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 agreements or transactions that are not contracts
described 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) ``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;
* * * * * * *
(46) ``repo participant'' means an entity that, [on
any day during the period beginning 90 days before the
date of] at any time before the filing of the petition,
has an outstanding repurchase agreement with the
debtor;
[(47) ``repurchase agreement'' (which definition also
applies to a reverse repurchase agreement) means an
agreement, including related terms, which provides for
the transfer of certificates of deposit, eligible
bankers' acceptances, 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
deposit, eligible bankers' acceptances, or securities
as described above, at a date certain not later than
one year after such transfers or on demand, against the
transfer of funds;]
(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 1 or more certificates of deposit,
mortgage-related securities (as defined
in the Securities Exchange Act of
1934), mortgage loans, interests in
mortgage-related securities or mortgage
loans, eligible bankers' acceptances,
qualified foreign government
securities, or securities that are
direct obligations of, or that are
fully guaranteed 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,
securities, loans, or interests, with a
simultaneous agreement by such
transferee to transfer to the
transferor thereof certificates of
deposit, eligible bankers' acceptance,
securities, loans, or interests of the
kind described above, at a date certain
not later than 1 year after such
transfer or on demand, against the
transfer of funds;
(ii) any combination of agreements or
transactions referred to in clauses (i)
and (iii);
(iii) an option to enter into an
agreement or transaction referred to in
clause (i) or (ii);
(iv) a master agreement that provides
for an agreement or transaction
referred to in clause (i), (ii), or
(iii), together with all supplements to
any such master agreement, without
regard to whether such master agreement
provides for an agreement or
transaction that is not a repurchase
agreement under this paragraph, except
that such master agreement shall be
considered to be a repurchase agreement
under this paragraph only with respect
to each agreement or transaction under
the master agreement that is referred
to in clause (i), (ii), or (iii); or
(v) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in clause (i), (ii), (iii),
or (iv), but not to exceed the actual
value of such contract on the date of
the filing of the petition; and
(B) does not include a repurchase obligation
under a participation in a commercial mortgage
loan,
and, for purposes of this paragraph, the term
``qualified foreign government security'' means a
security that is a direct obligation of, or that is
fully guaranteed by, the central government of a member
of the Organization for Economic Cooperation and
Development;
(48) ``securities clearing agency'' means person that
is registered as a clearing agency under section 17A of
the Securities Exchange Act of 1934 or exempt from such
registration under such section pursuant to an order of
the Securities and Exchange Commission or whose
business is confined to the performance of functions of
a clearing agency with respect to exempted securities,
as defined in section 3(a)(12) of such Act for the
purposes of such section 17A;
* * * * * * *
[(53B) ``swap agreement'' means--
[(A) an agreement (including terms and
conditions incorporated by reference therein)
which is a rate swap agreement, basis swap,
forward rate agreement, commodity swap,
interest rate option, forward foreign exchange
agreement, spot foreign exchange agreement,
rate cap agreement, rate floor agreement, rate
collar agreement, currency swap agreement,
cross-currency rate swap agreement, currency
option, any other similar agreement (including
any option to enter into any of the foregoing);
[(B) any combination of the foregoing; or
[(C) a master agreement for any of the
foregoing together with all supplements;]
(53B) ``swap agreement''--
(A) means--
(i) any agreement, including the
terms and conditions incorporated by
reference in 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 or
precious metals agreement; a currency
swap, option, future, or forward
agreement; an equity index or an equity
swap, option, future, or forward
agreement; a debt index or a debt swap,
option, future, or forward agreement; a
credit spread or a credit swap, option,
future, or forward agreement; a
commodity index or a commodity swap,
option, future, or forward agreement;
or a weather swap, weather derivative,
or weather option;
(ii) any agreement or transaction
similar to any other agreement or
transaction referred to in this
paragraph that--
(I) is presently, or in the
future becomes, regularly
entered into in the swap market
(including terms and conditions
incorporated by reference
therein); and
(II) is a forward, swap,
future, or option on 1 or more
rates, currencies, commodities,
equity securities, or other
equity instruments, debt
securities or other debt
instruments, or economic
indices or measures of economic
risk or value;
(iii) any combination of agreements
or transactions referred to in this
paragraph;
(iv) any option to enter into an
agreement or transaction referred to in
this paragraph;
(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, and
without regard to whether the master
agreement contains an agreement or
transaction that is not a swap
agreement under this paragraph, except
that the master agreement shall be
considered to be a swap agreement under
this paragraph only with respect to
each agreement or transaction under the
master agreement that is referred to in
clause (i), (ii), (iii), or (iv); or
(B) any security agreement or arrangement or
other credit enhancement related to any
agreements or transactions referred to in
subparagraph (A), but not to exceed the actual
value of such contract on the date of the
filing of the petition; and
(C) is applicable for purposes of this title
only and shall not be construed or applied so
as to challenge or affect the characterization,
definition, or treatment of any swap agreement
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 Futures
Trading Commission.
* * * * * * *
CHAPTER 3--CASE ADMINISTRATION
* * * * * * *
SUBCHAPTER I--COMMENCEMENT OF A CASE
* * * * * * *
Sec. 304. Cases ancillary to foreign proceedings
(a) * * *
* * * * * * *
(d) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements shall
apply in a case ancillary to a foreign proceeding under this
section or any other section of this title so that enforcement
of contractual provisions of such contracts and agreements in
accordance with their terms will not be stayed or otherwise
limited by operation of any provision 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 (such enforcement not to be limited based on
the presence or absence of assets of the debtor in the United
States).
SUBCHAPTER IV--ADMINISTRATIVE POWERS
* * * * * * *
Sec. 362. Automatic stay
(a) * * *
* * * * * * *
(b) The filing of a petition under section 301, 302, or 303
of this title, or of an application under section 5(a)(3) of
the Securities Investor Protection Act of 1970, does not
operate as a stay--
(1) * * *
* * * * * * *
(6) under subsection (a) of this section, of the
setoff by a commodity broker, forward contract
merchant, stockbroker, [financial institutions,]
financial institution, financial participant or
securities clearing agency of any mutual debt and claim
under or in connection with commodity contracts, as
defined in section 761 of this title, forward
contracts, or securities contracts, as defined in
section 741 of this title, that constitutes the setoff
of a claim against the debtor for a margin payment, as
defined in section 101, 741, or 761 of this title, or
settlement payment, as defined in section 101 or 741 of
this title, arising out of commodity contracts, forward
contracts, or securities contracts against cash,
securities, or other property held by, pledged to and
under the control of, or due from such commodity
broker, forward contract merchant, stockbroker,
[financial institutions,] financial institution,
financial participant or securities clearing agency to
margin, guarantee, secure, or settle commodity
contracts, forward contracts, or securities contracts;
(7) under subsection (a) of this section, of the
setoff by a repo participant, of any mutual debt and
claim under or in connection with repurchase agreements
that constitutes the setoff of a claim against the
debtor for a margin payment, as defined in section 741
or 761 of this title, or settlement payment, as defined
in section 741 of this title, arising out of repurchase
agreements against cash, securities, or other property
held by, pledged to and under the control of, or due
from such repo participant to margin, guarantee, secure
or settle repurchase agreements;
* * * * * * *
[(17) under subsection (a) of this section, 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 participant under or in
connection with any swap agreement or against cash,
securities, or other property of the debtor held by or
due from such swap participant to guarantee, secure or
settle any swap agreement; or]
(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in
connection with 1 or more swap agreements that
constitutes the setoff of a claim against the debtor
for any payment or other transfer of property 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 held by, pledged to and under the control of,
or due from such swap participant to margin, guarantee,
secure, or settle any swap agreement;
(18) under subsection (a) of the creation or
perfection of a statutory lien for an ad valorem
property tax imposed by the District of Columbia, or a
political subdivision of a State, if such tax comes due
after the filing of the petition[.]; or
(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 or any contract or agreement subject
to such agreements that constitutes the setoff of a
claim against the debtor for any payment or other
transfer of property due from the debtor under or in
connection with such agreements or any contract or
agreement subject to such agreements against any
payment due to the debtor from such master netting
agreement participant under or in connection with such
agreements or any contract or agreement subject to such
agreements or against cash, securities, or other
property held by, pledged to and under the control of,
or due from such master netting agreement participant
to margin, guarantee, secure, or settle such agreements
or any contract or agreement subject to such
agreements, to the extent such participant is eligible
to exercise such offset rights under paragraph (6),
(7), or (17) for each individual contract covered by
the master netting agreement in issue.
* * * * * * *
(i) Limitation.--The exercise of rights not subject to the
stay arising under subsection (a) pursuant to paragraph (6),
(7), or (17), or (32) of subsection (b) shall not be stayed by
any order of a court or administrative agency in any proceeding
under this title.
* * * * * * *
CHAPTER 5--CREDITORS, THE DEBTOR, AND THE ESTATE
* * * * * * *
SUBCHAPTER III--THE ESTATE
541. Property of the estate.
* * * * * * *
[555. Contractual right to liquidate a securities contract.
[556. Contractual right to liquidate a commodity contract or forward
contract.]
555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract.
* * * * * * *
[559. Contractual right to liquidate a repurchase agreement.
[560. Contractual right to terminate a swap agreement.]
559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.
561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across contracts.
562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts, repurchase
agreements, or master netting agreements.
* * * * * * *
SUBCHAPTER I--CREDITORS AND CLAIMS
* * * * * * *
Sec. 502. Allowance of claims or interests
(a) * * *
* * * * * * *
(g)(1) A claim arising from the rejection, under section 365
of this title or under a plan under chapter 9, 11, 12, or 13 of
this title, of an executory contract or unexpired lease of the
debtor that has not been assumed shall be determined, and shall
be allowed under subsection (a), (b), or (c) of this section or
disallowed under subsection (d) or (e) of this section, the
same as if such claim had arisen before the date of the filing
of the petition.
(2) A claim for damages calculated in accordance with section
562 shall be allowed under subsection (a), (b), or (c), or
disallowed under subsection (d) or (e), as if such claim had
arisen before the date of the filing of the petition.
* * * * * * *
SUBCHAPTER III--THE ESTATE
Sec. 541. Property of the estate
(a) * * *
* * * * * * *
(b) Property of the estate does not include--
(1) * * *
* * * * * * *
(4) any interest of the debtor in liquid or gaseous
hydrocarbons to the extent that--
(A) * * *
* * * * * * *
(B)(i) * * *
(ii) but for the operation of this paragraph,
the estate could include the interest referred
to in clause (i) only by virtue of section 542
of this title; [or]
(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 connectionwith an asset-backed
securitization, except to the extent such asset (or proceeds or value
thereof) may be recovered by the trustee under section 550 by virtue of
avoidance under section 548(a)(1); or
[(5)] (6) any interest in cash or cash equivalents
that constitute proceeds of a sale by the debtor of a
money order that is made--
(A) * * *
* * * * * * *
(e) For purposes of this section, the following definitions
shall apply:
(1) the term ``asset-backed securitization'' means a
transaction in which eligible assets transferred to an
eligible entity are used as the source of payment on
securities, including all securities issued by
governmental units, at least 1 class or tranche of
which is rated investment grade by 1 or more nationally
recognized securities rating organizations, when the
securities are initially issued by an issuer;
(2) the term ``eligible asset'' means--
(A) financial assets (including interests
therein and proceeds thereof), either fixed or
revolving, whether or not such assets are in
existence as of the date of the transfer,
including residential and commercial mortgage
loans, consumer receivables, trade receivables,
assets of governmental units (including payment
obligations relating to taxes, receipts, fines,
tickets, and other sources of revenue), and
lease receivables, that, by their terms,
convert into cash within a finite time period,
plus any residual interest in property subject
to receivables included in such financial
assets plus any rights or other assets designed
to assure the servicing or timely distribution
of proceeds to security holders;
(B) cash; and
(C) securities, including all securities
issued by governmental units.
(3) the term ``eligible entity'' means--
(A) an issuer; or
(B) a trust, corporation, partnership,
governmental unit, limited liability company
(including a single member limited liability
company), or other entity engaged exclusively
in the business of acquiring and transferring
eligible assets directly or indirectly to an
issuer and taking actions ancillary thereto;
(4) the term ``issuer'' means a trust, corporation,
partnership, governmental unit, limited liability
company (including a single member limited liability
company), or other entity engaged exclusively in the
business of acquiring and holding eligible assets,
issuing securities backed by eligible assets, and
taking actions ancillary thereto; and
(5) 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 intention of removing
them from the estate of the debtor pursuant to
subsection (b)(5) (whether or not reference is made to
this title or any section of this title), irrespective,
without limitation, of--
(A) whether the debtor directly or indirectly
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,
contribution, or other conveyance for tax,
accounting, regulatory reporting, or other
purposes.
* * * * * * *
Sec. 546. Limitations on avoiding powers
(a) * * *
* * * * * * *
(e) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b) of this title, the trustee may not avoid a transfer that
is a margin payment, as defined in section 101, 741, or 761 of
this title, or settlement payment, as defined in section 101 or
741 of this title, made by or to a commodity broker, forward
contract merchant, stockbroker, financial institution,
financial participant, or securities clearing agency, that is
made before the commencement of the case, except under section
548(a)(1)(A) of this title.
* * * * * * *
(g) Notwithstanding sections 544, 545, 547, 548(a)(1)(B) and
548(b) of this title, the trustee may not avoid a transfer
[under a swap agreement], made by or to a swap participant, [in
connection with a swap agreement] under or in connection with
any swap agreement and that is made before the commencement of
the case, except under section 548(a)(1)(A) of this title.
* * * * * * *
(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b), the trustee may not avoid a transfer made by or to a
master netting agreement participant under or in connection
with any master netting agreement or any individual contract
covered thereby that is made before the commencement of the
case, except under section 548(a)(1)(A), and except to the
extent the trustee could otherwise avoid such a transfer made
under an individual contract covered by such master netting
agreement.
* * * * * * *
Sec. 548. Fraudulent transfers and obligations
(a) * * *
* * * * * * *
(d)(1) * * *
(2) In this section--
(A) * * *
(B) a commodity broker, forward contract merchant,
stockbroker, financial institution, financial
participant, or securities clearing agency that
receives a margin payment, as defined in section 101,
741, or 761 of this title, or settlement payment, as
defined in section 101 or 741 of this title, takes for
value to the extent of such payment;
(C) a repo participant that receives a margin
payment, as defined in section 741 or 761 of this
title, or settlement payment, as defined in section 741
of this title, in connection with a repurchase
agreement, takes for value to the extent of such
payment; [and]
(D) a swap participant that receives a transfer in
connection with a swap agreement takes for value to the
extent of such transfer[.]; and
(E) a master netting agreement participant that
receives a transfer in connection with a master netting
agreement or any individual contract covered thereby
takes for value to the extent of such transfer, except,
with respect to a transfer under any individual
contract covered thereby, to the extent such master
netting agreement participant otherwise did not take
(or is otherwise not deemed to have taken) such
transfer for value.
* * * * * * *
Sec. 553. Setoff
(a) Except as otherwise provided in this section and in
sections 362 and 363 of this title, this title does not affect
any right of a creditor to offset a mutual debt owing by such
creditor to the debtor that arose before the commencement of
the case under this title against a claim of such creditor
against the debtor that arose before the commencement of the
case, except to the extent that--
(1) * * *
* * * * * * *
(3) the debt owed to the debtor by such creditor was
incurred by such creditor--
(A) * * *
* * * * * * *
(C) for the purpose of obtaining a right of
setoff against the debtor (except for a setoff
of a kind described in section 362(b)(6),
362(b)(7), 362(b)(17), 362(b)(32), 555, 556,
559, 560 or 561).
(b)(1) Except with respect to a setoff of a kind described in
section 362(b)(6), 362(b)(7), [362(b)(14)] 362(b)(17),
362(b)(32), 555, 556, 559, 560, 561, 365(h), 546(h), or
365(i)(2) of this title, if a creditor offsets a mutual debt
owing to the debtor against a claim against the debtor on or
within 90 days before the date of the filing of the petition,
then the trustee may recover from such creditor the amount so
offset to the extent that any insufficiency on the date of such
setoff is less than the insufficiency on the later of--
(A) * * *
* * * * * * *
[Sec. 555. Contractual right to liquidate a securities contract]
Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract
The exercise of a contractual right of a stockbroker,
financial institution, financial participant, or securities
clearing agency to cause the [liquidation] liquidation,
termination, or acceleration of a securities contract, as
defined in section 741 of this title, because of a condition of
the kind specified in section 365(e)(1) of this title shall not
be stayed, avoided, or otherwise limited by operation of any
provision of this title or by order of a court or
administrative agency in any proceeding under this title unless
such order is authorized under the provisions of the Securities
Investor Protection Act of 1970 or any statute administered by
the Securities and Exchange Commission. 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 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 in writing, arising under
common law, under law merchant, or by reason of normal business
practice.
[Sec. 556. Contractual right to liquidate a commodities contract or
forward contract]
Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract
The contractual right of a commodity broker, financial
participant or forward contract merchant to cause the
[liquidation] liquidation, termination, or acceleration of a
commodity contract, as defined in section 761 of this title, or
forward contract because of a condition of the kind specified
in section 365(e)(1) of this title, and the right to a
variation or maintenance margin payment received from a trustee
with respect to open commodity contracts or forward contracts,
shall not be stayed, avoided, or otherwise limited by operation
of any provision of this title or by the order of a court in
any proceeding under this title. As used in this section, the
term ``contractual right'' includes a right set forth in a rule
or 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.
* * * * * * *
[Sec. 559. Contractual right to liquidate a repurchase agreement]
Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement
The exercise of a contractual right of a repo participant to
cause the [liquidation] liquidation, termination, or
acceleration of a repurchase agreement because of a condition
of the kind specified in section 365(e)(1) of this title shall
not be stayed, avoided, or otherwise limited by operation of
any provision of this title or by order of a court or
administrative agency in any proceeding under this title,
unless, where the debtor is a stockbroker or securities
clearing agency, such order is authorized under the provisions
of the Securities Investor Protection Act of 1970 or any
statute administered by the Securities and Exchange Commission.
In the event that a repo participant liquidates one or more
repurchase agreements with a debtor and under the terms of one
or more such agreements has agreed to deliver assets subject to
repurchase agreements to the debtor, any excess of the market
prices received on liquidation of such assets (or if any such
assets are not disposed of on the date of liquidation of such
repurchase agreements, at the prices available at the time of
liquidation of such repurchase agreements from a generally
recognized source or the most recent closing bid quotation from
such a source) over the sum of the stated repurchase prices and
all expenses in connection with the liquidation of such
repurchase agreements shall be deemed property of the estate,
subject to the available rights of setoff. As used in this
section, the term ``contractual right'' includes a right set
forth in a rule or bylaw, applicable to each party to the
repurchase agreement, of a national securities exchange, a
national securities association, or a securities clearing
agency, and a right, whether or not evidenced in writing,
arising under common law, under law merchant or by reason of
normal business practice.
[Sec. 560. Contractual right to terminate a swap agreement]
Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement
The exercise of any contractual right of any swap participant
to cause the [termination of a swap agreement] liquidation,
termination, or acceleration of 1 or more swap agreements
because of a condition of the kind specified in section
365(e)(1) of this title or to offset or net out any termination
values or payment amounts arising under or [in connection with
any swap agreement] in connection with the termination,
liquidation, or acceleration of 1 or more swap agreements shall
not be stayed, avoided, or otherwise limited by operation of
any provision of this title or by order of a court or
administrative agency in any proceeding under this title. As
used in this section, the term ``contractual right'' includes a
right, whether or not evidenced in writing, arising under
common law, under law merchant, or by reason of normal business
practice.
Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts
(a) In General.--Subject to subsection (b), the exercise of
any contractual right, because of a condition of the kind
specified in section 365(e)(1), to cause the termination,
liquidation, or acceleration of or to offset or net termination
values, payment amounts or other transfer obligations arising
under or in connection with 1 or more (or the termination,
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 operation
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) If a debtor is a commodity broker subject to
subchapter IV of chapter 7--
(A) 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 connection with,
other instruments, contracts, or agreements
listed in subsection (a), except to the extent
the party has positive net equity in the
commodity accounts at the debtor, as calculated
under such subchapter; and
(B) another commodity broker may not net or
offset an obligation to the debtor arising
under, or in connection with, a commodity
contract entered into or held on behalf of a
customer of the debtor against any claim
arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
(c) Rule of Application.--Subparagraphs (A) and (B) of
subsection (b)(2) shall not be construed as prohibiting the
offset of claims and obligations arising pursuant to--
(1) a cross-margining arrangement that has been
approved by the Commodity Futures Trading Commission or
that has been submitted to such Commission pursuant to
section 5a(a)(12) of the Commodity Exchange Act and has
been permitted to go into effect; or
(2) another netting arrangement, between a clearing
organization (as defined in section 761) and another
entity, that has been approved by the Commodity Futures
Trading Commission.
(d) 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 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 evidenced in writing, arising under common law,
under law merchant, or by reason of normal business practice.
Sec. 562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity contracts,
repurchase agreements, or master netting agreements
If the trustee rejects a swap agreement, securities contract
as defined in section 741, forward contract, commodity contract
(as defined in section 761) repurchase agreement, or master
netting agreement pursuant to section 365(a), or if a forward
contract merchant, stockbroker, financial institution,
securities clearing agency, repo participant, financial
participant, master netting agreement participant, or swap
participant liquidates, terminates, or accelerates 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.
* * * * * * *
CHAPTER 7--LIQUIDATION
* * * * * * *
SUBCHAPTER III--STOCKBROKER LIQUIDATION
741. Definitions for this subchapter.
* * * * * * *
753. Stockbroker liquidation and forward contract merchants, commodity
brokers, stockbrokers, financial institutions, financial
participants, securities clearing agencies, swap participants,
repo participants, and master netting agreement participants.
SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION
* * * * * * *
767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies, swap
participants, repo participants, and master netting agreement
participants.
* * * * * * *
SUBCHAPTER III--STOCKBROKER LIQUIDATION
Sec. 741. Definitions for this subchapter
In this subchapter--
(1) * * *
* * * * * * *
[(7) ``securities contract'' means contract for the
purchase, sale, or loan of a security, including an
option for the purchase or sale of a security,
certificate of deposit, or group or index of securities
(including 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 clearing agency;]
(7) ``securities contract''--
(A) means--
(i) a contract for the purchase,
sale, or loan of a security, a
certificate of deposit, a mortgage loan
or any interest in a mortgage loan, a
group or index of securities,
certificates of deposit or mortgage
loans or interests therein (including
an interest therein or based on the
value thereof), or option on any of the
foregoing, including an 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
national securities exchange relating
to foreign currencies;
(iii) the guarantee by or to any
securities clearing agency of a
settlement of cash, securities,
certificates of deposit, mortgage loans
or interests therein, group or index of
securities, or mortgage loans or
interests therein (including any
interest therein or based on the value
thereof), or option on any of the
foregoing, including an option to
purchase or sell any such security,
certificate of deposit, loan, interest,
group or index, or option;
(iv) any margin loan;
(v) any other agreement or
transaction that is similar to an
agreement or transaction referred to in
this paragraph;
(vi) any combination of the
agreements or transactions referred to
in this paragraph;
(vii) any option to enter into any
agreement or transaction referred to in
this paragraph;
(viii) a master agreement that
provides for an agreement or
transaction referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii),
together with all supplements to any
such master agreement, without regard
to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this paragraph, except
that such master agreement shall be
considered to be a securities contract
under this paragraph only with respect
to each agreement or transaction under
such master agreement that is referred
to in clause (i), (ii), (iii), (iv),
(v), (vi), or (vii); or
(ix) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this paragraph, but not
to exceed the actual value of such
contract on the date of the filing of
the petition; and
(B) does not include any purchase, sale, or
repurchase obligation under a participation in
a commercial mortgage loan.
* * * * * * *
Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants, 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, securities clearing
agency, swap participant, repo participant, financial
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.
SUBCHAPTER IV--COMMODITY BROKER LIQUIDATION
Sec. 761. Definitions for this subchapter
In this subchapter--
(1) * * *
* * * * * * *
(4) ``commodity contract'' means--
(A) * * *
* * * * * * *
(D) with respect to a clearing organization,
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 that is cleared by such clearing
organization, or commodity option traded on, or
subject to the rules of, a contract market or
board of trade that is cleared by such clearing
organization; [or]
* * * * * * *
(F) any other agreement or transaction that
is similar to an 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 an agreement or
transaction referred to in this paragraph;
(I) a master agreement that provides for an
agreement or transaction referred to in
subparagraph (A), (B), (C), (D), (E), (F), (G),
or (H), together with all supplements to such
master agreement, without regard to whether the
master agreement provides for an agreement 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) any security agreement or arrangement or
other credit enhancement related to any
agreement or transaction referred to in this
paragraph, but not to exceed the actual value
of such contract on the date of the filing of
the petition;
* * * * * * *
Sec. 767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants, 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, financial
participant, securities 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.
* * * * * * *
CHAPTER 9--ADJUSTMENT OF DEBTS OF A MUNICIPALITY
* * * * * * *
Sec. 901. Applicability of other sections of this title
(a) Sections 301, 344, 347(b), 349, 350(b), 361, 362, 364(c),
364(d), 364(e), 364(f), 365, 366, 501, 502, 503, 504, 506,
507(a)(1), 509, 510, 524(a)(1), 524(a)(2), 544, 545, 546, 547,
548, 549(a), 549(c), 549(d), 550, 551, 552, 553, 555, 556, 557,
559, 560, 561, 562, 1102, 1103, 1109, 1111(b), 1122,
1123(a)(1), 1123(a)(2), 1123(a)(3), 1123(a)(4), 1123(a)(5),
1123(b), 1124, 1125, 1126(a), 1126(b), 1126(c), 1126(e),
1126(f), 1126(g), 1127(d), 1128, 1129(a)(2), 1129(a)(3),
1129(a)(6), 1129(a)(8), 1129(a)(10), 1129(b)(1), 1129(b)(2)(A),
1129(b)(2)(B), 1142(b), 1143, 1144, and 1145 of this title
apply in a case under this chapter.
* * * * * * *
----------
SECTION 5 OF THE SECURITIES INVESTOR PROTECTION ACT OF 1970
SEC. 5. PROTECTION OF CUSTOMERS.
(a) * * *
* * * * * * *
(b) Court Action.--
(1) * * *
* * * * * * *
(2) Jurisdiction and powers of court.--
(A) * * *
* * * * * * *
(C) Exception from stay.--
(i) Notwithstanding section 362 of
title 11, United States Code, neither
the filing of an application under
subsection (a)(3) nor any order or
decree obtained by the Securities
Investor Protection Corporation from
the court shall operate as a stay of
any contractual rights of a creditor to
liquidate, terminate, or accelerate a
securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master
netting agreement, each as defined in
title 11, United States Code, to offset
or net termination values, payment
amounts, or other transfer obligations
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
or disposition of securities collateral
pledged by the debtor, whether or not
with respect to 1 or more of such
contracts or agreements, securities
sold by the debtor under a repurchase
agreement or securities lent under a
securities lending agreement.
(iii) 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 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 in
writing, arising under common law,
under law merchant, or by reason of
normal business practice.
* * * * * * *