OCC order exempts ‘non-U.S. nonlinked’ contracts from express recognition requirements of QFC stay rule

Certain categories of qualified financial contracts (QFCs) entered into by foreign subsidiaries of large, systemically important banks are exempted from general stay-and-transfer provisions of the U.S. special resolution regimes, the national bank and thrift regulator said in a bulletin Monday.

The OCC said it issued an order Sept. 30 to exempt non-U.S., nonlinked contracts from the express recognition requirements of the Office of the Comptroller of the Currency’s (OCC) QFC stay rule, according to the bulletin. The QFC stay rule addresses concerns relating to the exercise of default rights of certain financial contracts that could interfere with the orderly resolution of certain systemically important financial firms. Similar rules are in place at the Federal Deposit Insurance Corp. (FDIC) and Federal Reserve.

The OCC said it made its determination after considering the potential impact of the exemption on the ability of the covered bank, or its affiliates, to be resolved in a rapid and orderly manner in the event of the financial distress or failure of the entity that is required to submit a resolution plan; and the burden that the exemption would relieve.

OCC Bulletin 2020-95

Sept. 30 exemption order