Final rule with ‘stay-and-transfer’ provision in qualified financial contracts set for publication

A final rule requiring banks to ensure that a covered qualified financial contract contains a contractual “stay-and-transfer” provision – like that outlined in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) – is set to be published by the Office of the Comptroller of the Currency (OCC).

According to filings made by the comptroller with the Federal Register, the final rule will take effect Jan. 1. It is intended to address concerns related to the exercise of default rights of certain financial contracts that, the OCC said, could “interfere with the orderly resolution of certain systemically important financial firms.”

In addition to the “stay-and-transfer” provision, the final rule limits the exercise of default rights based on the insolvency of an affiliate of the covered bank. The rule also makes conforming amendments to the Capital Adequacy Standards and the Liquidity Risk Measurement Standards in the agency’s regulations.

OCC said the final rule’s requirements are substantively identical to those adopted in final rules issued by the Federal Reserve and the Federal Deposit Insurance Corporation (FDIC).

Mandatory Contractual Stay Requirements for Qualified Financial Contracts

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