FDIC Finalizes Limits on Qualified Financial Contracts

The FDIC today finalized restrictions on qualified financial contracts — such as derivative transactions, repurchase agreements, reverse repurchase agreements, and securities lending and borrowing agreements — of state-chartered non-Fed-member banks. The objective of the proposal is to facilitate the orderly resolution of a failed institution by limiting the ability of the firm’s QFC counterparties to terminate contracts immediately upon the entry of the covered entity or one of its affiliates into resolution.

The rule is “substantively identical” to QFC rules finalized by the Federal Reserve and OCC that apply to institutions supervised by those agencies. The FDIC rule takes effect on Jan. 1, 2018.