H.R.4393 - Financial Contract Netting Improvement Act of 1998105th Congress (1997-1998)
|Sponsor:||Rep. Leach, James A. [R-IA-1] (Introduced 08/04/1998)|
|Committees:||House - Banking and Financial Services; Judiciary; Commerce|
|Committee Reports:||H. Rept. 105-688|
|Latest Action:||House - 09/25/1998 Placed on the Union Calendar, Calendar No. 428. (All Actions)|
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Summary: H.R.4393 — 105th Congress (1997-1998)All Information (Except Text)
Introduced in House (08/04/1998)
Financial Contract Netting Improvement Act of 1998 - Amends the Federal Deposit Insurance Act (FDIA) to redefine specified contracts, agreements, and transfers entered into with an insolvent insured depository institution before the appointment of a conservator or receiver for it.
(Sec. 2) Declares that no person shall be stayed or prohibited from exercising any right to cause the acceleration of any qualified financial contract with an insured depository institution which arises upon the appointment of the Federal Deposit Insurance Corporation (FDIC) as receiver at any time after such appointment.
(Sec. 3) Declares that no provision of law shall be construed as limiting the right or power of the FDIC, or authorizing any court or agency to limit or delay, in any manner, the FDIC's right or power to transfer, disaffirm, or repudiate any qualified financial contract of a failed institution.
Prohibits enforcement of a walkaway clause in a qualified financial contract of a failed insured depository institution (a clause that either does not create a payment obligation of a party, or extinguishes it solely because of such party's status as a nondefaulting party).
(Sec. 4) Revises guidelines governing transfers of qualified financial contracts of an insolvent institution to include: (1) transfers to a foreign bank or foreign financial institution (including its branch or agency) (but only when the contractual rights of the parties to such qualified financial contracts are enforceable substantially to the same extent as permitted under such Act); and (2) transfers of contracts subject to the rules of a clearing organization. Defines financial institution to include a broker or dealer, a depository institution, a futures commission merchant, or any other institution as determined by FDIC regulation.
Suspends certain termination rights of counterparties to a qualified financial contract with an insolvent insured depository institution until after the receiver's appointment, or after receipt of notice that the contract has been transferred.
Declares that none of the following institutions shall 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: (1) a bridge bank; or (2) an FDIC-organized depository institution for which a conservator is appointed either immediately upon organization, or at the time of a purchase and assumption transaction between such institution and the FDIC as receiver for a depository institution in default.
(Sec. 5) Prescribes guidelines for: (1) the disaffirmance or repudiation of qualified financial contracts by the conservator or receiver for a failed depository institution; and (2) the treatment of a master agreement as a single agreement and a single qualified financial contract.
(Sec. 7) Amends the Federal Deposit Insurance Corporation Improvement Act of 1991 to make conforming amendments with respect to: (1) bilateral netting contracts; (2) security agreements; (3) clearing organization netting contracts; (4) contracts with uninsured national banks; and (5) contracts with uninsured Federal branches or agencies.
(Sec. 8) Amends the Federal Bankruptcy Code to reflect the changes made by this Act and to: (1) deny an automatic stay to set-offs under certain swap agreements and netting agreements; and (2) restrict the avoidance power of the bankruptcy trustee regarding certain master netting agreement transfers to those transfers that are fraudulent in nature.
Sets forth statutory guidelines for: (1) the termination or acceleration of designated contracts and agreements; and (2) commodity broker and stockbroker liquidation with respect to the priority of unsecured claims, or customer property or distributions.
(Sec. 9) Amends the FDIA to authorize the FDIC to prescribe more detailed recordkeeping requirements for qualified financial contracts (including market valuations) by insured depository institutions.
(Sec. 10) Exempts specified collateralization agreements from the contemporaneous execution requirement that renders invalid certain agreements against FDIC interests in certain asset acquisitions.
(Sec. 11) Amends Federal bankruptcy law to specify the date for the measure of damages in connection with: (1) rejection by the bankruptcy trustee of designated contracts and agreements relating to executory contracts and unexpired leases; or (2) the liquidation, acceleration, or termination of such contracts and agreements.
(Sec. 12) Declares that property of the bankrupt estate does not include any eligible asset (or its proceeds) to the extent that it was transferred by the debtor before commencement of the case to an eligible entity in connection with an asset-backed securitization (except to the extent that such asset, or its proceeds or value, may be recovered through avoidance by the bankruptcy trustee).
(Sec. 13) Amends the Securities Investor Protection Act of 1971 to provide that neither the filing of a protective decree by the Securities Investor Protection Corporation, nor any court protective order, shall operate as a stay of a creditor's contractual rights to liquidate, terminate, or accelerate designated contracts and agreements. Allows such application, order, or decree, however, to operate as a stay of foreclosure on securities collateral pledged by the debtor, whether or not with respect to one or more of such contracts, agreements, or securities sold by the debtor under a repurchase agreement.
(Sec. 14) Amends the FRA to increase the types of acceptances eligible to meet Federal Reserve collateral requirements.