Intending to enhance global financial stability, the Federal Reserve Board of Governors has adopted a final rule prohibiting U.S. global systemically important banking institutions (GSIBs) and the U.S. operations of foreign GSIBs allowing the immediate cancellation or termination of qualified financial contracts if a firm enters bankruptcy or a resolution process.
The board voted to adopt the rule at a recent meeting that began with opening remarks from Fed Board Chairperson Janet Yellen, speaking in support of the rule.
Be aware of what this may mean for future contracts involving the world’s largest banking entities.