Process for Approval of Enhanced Creditor Protections. (Section 382.5 of the Proposed Rule) As discussed above, the restrictions of the final rule would leave many creditor protections that are commonly included in QFCs unaffected. The final rule would also allow any 195 See Section 4(b)(i)(A) of the Universal Protocol. 196 Section 2 of the Universal Protocol provides an exemption for any client-facing leg of a cleared transaction. See Section 2(k) of the Universal Protocol and the definition of “Cleared Client Transaction.” The final rule does not amend the proposal’s treatment of QFCs that are “Cleared Client Transactions” under the Universal Protocol, but requires that the provisions of that section must not apply with respect to the U.S. Protocol. See final rule § 382.5(a)(3)(ii)(E). covered FSI to submit to the FDIC a request to approve as compliant with the rule one or more QFCs that contain additional creditor protections—that is, creditor protections that would be impermissible under the restrictions set forth above.197 A covered FSI making such a request would be required to provide an analysis of the contractual terms for which approval is requested in light of a range of factors that are set forth in the final rule and intended to facilitate the FDIC’s consideration of whether permitting the contractual terms would be consistent with the proposed restrictions.198 The FDIC also expects to consult with the FRB and OCC during its consideration of such a request—in particular, when the covered QFC is between a covered FSI and either a covered bank or a covered entity. The first two factors concern the potential impact of the requested creditor protections on GSIB resilience and resolvability. The next four concern the scope of the final rule: adoption on an industry-wide basis, coverage of existing and future transactions, coverage of one or multiple QFCs, and coverage of some or all covered entities, covered banks, and covered FSIs. Creditor protections that may be applied on an industry-wide basis may help to ensure that impediments to resolution are addressed on a uniform basis, which could increase market certainty, transparency, and equitable treatment. Creditor protections that apply broadly to a range of QFCs and covered entities, covered banks, and covered FSIs would increase the chances that all of a GSIB’s QFC counterparties would be treated the same way during a resolution of that GSIB and may improve the prospects for an orderly resolution of that GSIB. By contrast, proposals that would expa...
Process for Approval of Enhanced Creditor Protections. (Section 382.5 of the Proposed Rule) 92 The Protocol also includes other special resolution regimes. Currently, the Protocol includes special resolution regimes in place in France, Germany, Japan, Switzerland, and the United Kingdom. Other special resolution regimes that meet the definition of “Protocol-eligible Regime” may be added to the Protocol.
