Federal Register - October 1, 2021
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Source: Federal Register
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Federal Register / Vol. 86, No. 188 / Friday, October 1, 2021 / Rules and Regulations
Insurance Act, Title II of the DoddFrank Act, or under any similar insolvency law applicable to GSEs,2 or laws of foreign jurisdictions that are substantially similar to the U.S. laws referenced in this paragraph 1iiiA1 in order to facilitate the orderly resolution of the defaulting counterparty; or 2 Where the agreement is subject by its terms to, or incorporates, any of the laws referenced in paragraph 1iiiA1 of this definition; and B The agreement may limit the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty to the extent necessary for the counterparty to comply with the requirements of part 47, subpart I of part 252, or part 382 of this title, as applicable.
2 In order to recognize an exposure as an eligible margin loan for purposes of this subpart, a System institution must comply with the requirements of 628.3b with respect to that exposure.
Qualifying master netting agreement means a written, legally enforceable agreement provided that:
1 The agreement creates a single legal obligation for all individual transactions covered by the agreement upon an event of default following any stay permitted by paragraph 2 of this definition, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty;
2 The agreement provides the System institution the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, conservatorship, insolvency, liquidation, or similar proceeding, of the counterparty, provided that, in any such case:
i Any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than:
A In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the Dodd2 This requirement is met where all transactions under the agreement are i executed under U.S. law and ii constitute securities contracts under section 555 of the Bankruptcy Code 11 U.S.C. 555, qualified financial contracts under section 11e8
of the Federal Deposit Insurance Act, or netting contracts between or among financial institutions under sections 401407 of the Federal Deposit Insurance Corporation Improvement Act or the Federal Reserve Boards Regulation EE 12 CFR part 231.
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Frank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar to the U.S. laws referenced in this paragraph 2iA in order to facilitate the orderly resolution of the defaulting counterparty; or B Where the agreement is subject by its terms to, or incorporates, any of the laws referenced in paragraph 2iA of this definition; and ii The agreement may limit the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty to the extent necessary for the counterparty to comply with the requirements of part 47, subpart I of part 252, or part 382 of this title, as applicable;
3 The agreement does not contain a walkaway clause that is, a provision that permits a non-defaulting counterparty to make a lower payment than it otherwise would make under the agreement, or no payment at all, to a defaulter or the estate of a defaulter, even if the defaulter or the estate of the defaulter is a net creditor under the agreement; and 4 In order to recognize an agreement as a qualifying master netting agreement for purposes of this subpart, a System institution must comply with the requirements of 628.3d with respect to that agreement.
Repo-style transaction means a repurchase or reverse repurchase transaction, or a securities borrowing or securities lending transaction, including a transaction in which the System institution acts as agent for a customer and indemnifies the customer against loss, provided that:
1 The transaction is based solely on liquid and readily marketable securities, cash, or gold;
2 The transaction is marked-to-fair value daily and subject to daily margin maintenance requirements;
3i The transaction is a securities contract or repurchase agreement under section 555 or 559, respectively, of the Bankruptcy Code 11 U.S.C. 555
or 559, a qualified financial contract under section 11e8 of the Federal Deposit Insurance Act, or a netting contract between or among financial institutions under sections 401407 of the Federal Deposit Insurance Corporation Improvement Act or the Federal Reserves Regulation EE 12 CFR
part 231; or ii If the transaction does not meet the criteria set forth in paragraph 3i of this definition, then either:
A The transaction is executed under an agreement that provides the System
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institution the right to accelerate, terminate, and close-out the transaction on a net basis and to liquidate or set-off collateral promptly upon an event of default, including upon an event of receivership, insolvency, liquidation, or similar proceeding, of the counterparty, provided that, in any such case:
1 Any exercise of rights under the agreement will not be stayed or avoided under applicable law in the relevant jurisdictions, other than:
i In receivership, conservatorship, or resolution under the Federal Deposit Insurance Act, Title II of the DoddFrank Act, or under any similar insolvency law applicable to GSEs, or laws of foreign jurisdictions that are substantially similar to the U.S. laws referenced in this paragraph 3iiA1i in order to facilitate the orderly resolution of the defaulting counterparty;
ii Where the agreement is subject by its terms to, or incorporates, any of the laws referenced in paragraph 3iiA1i of this definition; and 2 The agreement may limit the right to accelerate, terminate, and close-out on a net basis all transactions under the agreement and to liquidate or set-off collateral promptly upon an event of default of the counterparty to the extent necessary for the counterparty to comply with the requirements of part 47, subpart I of part 252, or part 382 of this title, as applicable; or B The transaction is:
1 Either overnight or unconditionally cancelable at any time by the System institution; and 2 Executed under an agreement that provides the System institution the right to accelerate, terminate, and close-out the transaction on a net basis and to liquidate or set-off collateral promptly upon an event of counterparty default;
and 4 In order to recognize an exposure as a repo-style transaction for purposes of this subpart, a System institution must comply with the requirements of 628.3e with respect to that exposure.
System institution means a System bank, an association of the Farm Credit System, and their successors, and any other institution chartered by the Farm Credit Administration FCA that the FCA determines should be considered a System institution for the purposes of this subpart.
12. Amend 628.10 by revising paragraph c4 to read as follows:
628.10
E:FRFM01OCR1.SGM
Minimum capital requirements.
01OCR1
