[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 11 Introduced in House (IH)]
107th CONGRESS
1st Session
H. R. 11
To revise the banking and bankruptcy insolvency laws with respect to
the termination and netting of financial contracts, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 3, 2001
Mr. Leach introduced the following bill; which was referred to the
Committee on Banking and Financial Services, and in addition to the
Committee on the Judiciary, for a period to be subsequently determined
by the Speaker, in each case for consideration of such provisions as
fall within the jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To revise the banking and bankruptcy insolvency laws with respect to
the termination and netting of financial contracts, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Financial Contract Netting
Improvement Act of 2001''.
SEC. 2. TREATMENT OF CERTAIN AGREEMENTS BY CONSERVATORS OR RECEIVERS OF
INSURED DEPOSITORY INSTITUTIONS.
(a) Definition of Qualified Financial Contract.--Section
11(e)(8)(D)(i) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)(D)(i)) is amended by inserting ``, resolution or order''
after ``any similar agreement that the Corporation determines by
regulation''.
(b) Definition of Securities Contract.--Section 11(e)(8)(D)(ii) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(ii)) is
amended to read as follows:
``(ii) Securities contract.--The term
`securities contract'--
``(I) means a contract for the
purchase, sale, or loan of a security,
a certificate of deposit, a mortgage
loan, or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit, or mortgage
loans or interests therein (including
any interest therein or based on the
value thereof) or any option on any of
the foregoing, including any option to
purchase or sell any such security,
certificate of deposit, loan, interest,
group or index, or option;
``(II) does not include any
purchase, sale, or repurchase
obligation under a participation in a
commercial mortgage loan unless the
Corporation determines by regulation,
resolution, or order to include any
such agreement within the meaning of
such term;
``(III) means any option entered
into on a national securities exchange
relating to foreign currencies;
``(IV) means the guarantee by or to
any securities clearing agency of any
settlement of cash, securities,
certificates of deposit, mortgage loans
or interests therein, group or index of
securities, certificates of deposit, or
mortgage loans or interests therein
(including any interest therein or
based on the value thereof) or option
on any of the foregoing, including any
option to purchase or sell any such
security, certificate of deposit, loan,
interest, group or index, or option;
``(V) means any margin loan;
``(VI) means any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) means any combination of
the agreements or transactions referred
to in this clause;
``(VIII) means any option to enter
into any agreement or transaction
referred to in this clause;
``(IX) means a master agreement
that provides for an agreement or
transaction referred to in subclause
(I), (III), (IV), (V), (VI), (VII), or
(VIII), together with all supplements
to any such master agreement, without
regard to whether the master agreement
provides for an agreement or
transaction that is not a securities
contract under this clause, except that
the master agreement shall be
considered to be a securities contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (III), (IV), (V), (VI),
(VII), or (VIII); and
``(X) means any security agreement
or arrangement or other credit
enhancement related to any agreement or
transaction referred to in this
clause.''.
(c) Definition of Commodity Contract.--Section 11(e)(8)(D)(iii) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iii)) is
amended to read as follows:
``(iii) Commodity contract.--The term
`commodity contract' means--
``(I) with respect to a futures
commission merchant, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade;
``(II) with respect to a foreign
futures commission merchant, a foreign
future;
``(III) with respect to a leverage
transaction merchant, a leverage
transaction;
``(IV) with respect to a clearing
organization, a contract for the
purchase or sale of a commodity for
future delivery on, or subject to the
rules of, a contract market or board of
trade that is cleared by such clearing
organization, or commodity option
traded on, or subject to the rules of,
a contract market or board of trade
that is cleared by such clearing
organization;
``(V) with respect to a commodity
options dealer, a commodity option;
``(VI) any other agreement or
transaction that is similar to any
agreement or transaction referred to in
this clause;
``(VII) any combination of the
agreements or transactions referred to
in this clause;
``(VIII) any option to enter into
any agreement or transaction referred
to in this clause;
``(IX) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), (IV), (V), (VI),
(VII), or (VIII), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
commodity contract under this clause,
except that the master agreement shall
be considered to be a commodity
contract under this clause only with
respect to each agreement or
transaction under the master agreement
that is referred to in subclause (I),
(II), (III), (IV), (V), (VI), (VII), or
(VIII); or
``(X) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in this clause.''.
(d) Definition of Forward Contract.--Section 11(e)(8)(D)(iv) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(iv)) is amended
to read as follows:
``(iv) Forward contract.--The term `forward
contract' means--
``(I) a contract (other than a
commodity contract) for the purchase,
sale, or transfer of a commodity or any
similar good, article, service, right,
or interest which is presently or in
the future becomes the subject of
dealing in the forward contract trade,
or product or byproduct thereof, with a
maturity date more than 2 days after
the date the contract is entered into,
including a repurchase transaction,
reverse repurchase transaction,
consignment, lease, swap, hedge
transaction, deposit, loan, option,
allocated transaction, unallocated
transaction, or any other similar
agreement;
``(II) any combination of
agreements or transactions referred to
in subclauses (I) and (III);
``(III) any option to enter into
any agreement or transaction referred
to in subclause (I) or (II);
``(IV) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), or (III), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
forward contract under this clause,
except that the master agreement shall
be considered to be a forward contract
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), or (III); or
``(V) any security agreement or
arrangement or other credit enhancement
related to any agreement or transaction
referred to in subclause (I), (II),
(III), or (IV).''.
(e) Definition of Repurchase Agreement.--Section 11(e)(8)(D)(v) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(v)) is
amended to read as follows:
``(v) Repurchase agreement.--The term
`repurchase agreement' (which definition also
applies to the term `reverse repurchase
agreement')--
``(I) means an agreement, including
related terms, which provides for the
transfer of 1 or more certificates of
deposit, mortgage-related securities
(as such term is defined in the
Securities Exchange Act of 1934),
mortgage loans, interests in mortgage-
related securities or mortgage loans,
eligible bankers' acceptances,
qualified foreign government securities
or securities that are direct
obligations of, or that are fully
guaranteed by, the United States or any
agency of the United States against the
transfer of funds by the transferee of
such certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests with a simultaneous
agreement by such transferee to
transfer to the transferor thereof
certificates of deposit, eligible
bankers' acceptances, securities,
loans, or interests as described above,
at a date certain not later than 1 year
after such transfers or on demand,
against the transfer of funds, or any
other similar agreement;
``(II) does not include any
repurchase obligation under a
participation in a commercial mortgage
loan unless the Corporation determines
by regulation, resolution, or order to
include any such participation within
the meaning of such term;
``(III) means any combination of
agreements or transactions referred to
in subclauses (I) and (IV);
``(IV) means any option to enter
into any agreement or transaction
referred to in subclause (I) or (III);
``(V) means a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (III), or (IV), together with all
supplements to any such master
agreement, without regard to whether
the master agreement provides for an
agreement or transaction that is not a
repurchase agreement under this clause,
except that the master agreement shall
be considered to be a repurchase
agreement under this subclause only
with respect to each agreement or
transaction under the master agreement
that is referred to in subclause (I),
(III), or (IV); and
``(VI) means any security agreement
or arrangement or other credit
enhancement related to any agreement or
transaction referred to in subclause
(I), (III), (IV), or (V).
For purposes of this clause, the term
`qualified foreign government security' means a
security that is a direct obligation of, or
that is fully guaranteed by, the central
government of a member of the Organization for
Economic Cooperation and Development (as
determined by regulation or order adopted by
the appropriate Federal banking authority).''.
(f) Definition of Swap Agreement.--Section 11(e)(8)(D)(vi) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(vi)) is amended
to read as follows:
``(vi) Swap agreement.--The term `swap
agreement' means--
``(I) any agreement, including the
terms and conditions incorporated by
reference in any such agreement, which
is an interest rate swap, option,
future, or forward agreement, including
a rate floor, rate cap, rate collar,
cross-currency rate swap, and basis
swap; a spot, same day-tomorrow,
tomorrow-next, forward, or other
foreign exchange or precious metals
agreement; a currency swap, option,
future, or forward agreement; an equity
index or equity swap, option, future,
or forward agreement; a debt index or
debt swap, option, future, or forward
agreement; a credit spread or credit
swap, option, future, or forward
agreement; a commodity index or
commodity swap, option, future, or
forward agreement; or a weather swap,
weather derivative, or a weather
option;
``(II) any agreement or transaction
similar to any other agreement or
transaction referred to in this clause
that is presently, or in the future
becomes, regularly entered into in the
swap market (including terms and
conditions incorporated by reference in
such agreement) and that is a forward,
swap, future, or option on 1 or more
rates, currencies, commodities, equity
securities or other equity instruments,
debt securities or other debt
instruments, or economic indices or
measures of economic risk or value;
``(III) any combination of
agreements or transactions referred to
in this clause;
``(IV) any option to enter into any
agreement or transaction referred to in
this clause;
``(V) a master agreement that
provides for an agreement or
transaction referred to in subclause
(I), (II), (III), or (IV), together
with all supplements to any such master
agreement, without regard to whether
the master agreement contains an
agreement or transaction that is not a
swap agreement under this clause,
except that the master agreement shall
be considered to be a swap agreement
under this clause only with respect to
each agreement or transaction under the
master agreement that is referred to in
subclause (I), (II), (III), or (IV);
and
``(VI) any security agreement or
arrangement or other credit enhancement
related to any agreements or
transactions referred to in
subparagraph (I), (II), (III), (IV), or
(V).
Such term is applicable for purposes of this
title only and shall not be construed or
applied so as to challenge or affect the
characterization, definition, or treatment of
any swap agreement under any other statute,
regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of
1934, the Public Utility Holding Company Act of
1935, the Trust Indenture Act of 1939, the
Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Securities Investor
Protection Act of 1970, the Commodity Exchange
Act, and the regulations promulgated by the
Securities and Exchange Commission or the
Commodity Futures Trading Commission.''.
(g) Definition of Transfer.--Section 11(e)(8)(D)(viii) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)(D)(viii)) is
amended to read as follows:
``(viii) Transfer.--The term `transfer'
means every mode, direct or indirect, absolute
or conditional, voluntary or involuntary, of
disposing of or parting with property or with
an interest in property, including retention of
title as a security interest and foreclosure of
the depository institutions's equity of
redemption.''.
(h) Treatment of Qualified Financial Contracts.--Section 11(e)(8)
of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)) is
amended--
(1) in subparagraph (A), by striking ``paragraph (10)'' and
inserting ``paragraphs (9) and (10)'';
(2) in subparagraph (A)(i), by striking ``to cause the
termination or liquidation'' and inserting ``such person has to
cause the termination, liquidation, or acceleration'';
(3) by amending subparagraph (A)(ii) to read as follows:
``(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);'';
and
(4) by amending subparagraph (E)(ii) to read as follows:
``(ii) any right under any security
agreement or arrangement or other credit
enhancement related to 1 or more qualified
financial contracts described in clause (i);''.
(i) Avoidance of Transfers.--Section 11(e)(8)(C)(i) of the Federal
Deposit Insurance Act (12 U.S.C. 1821(e)(8)(C)(i)) is amended by
inserting ``section 5242 of the Revised Statutes of the United States
(12 U.S.C. 91) or any other Federal or State law relating to the
avoidance of preferential or fraudulent transfers,'' before ``the
Corporation''.
SEC. 3. AUTHORITY OF THE CORPORATION WITH RESPECT TO FAILED AND FAILING
INSTITUTIONS.
(a) In General.--Section 11(e)(8) of the Federal Deposit Insurance
Act (12 U.S.C. 1821(e)(8)) is amended--
(1) in subparagraph (E), by striking ``other than paragraph
(12) of this subsection, subsection (d)(9)'' and inserting
``other than subsections (d)(9) and (e)(10)''; and
(2) by adding at the end the following new subparagraphs:
``(F) Clarification.--No provision of law shall be
construed as limiting the right or power of the
Corporation, or authorizing any court or agency to
limit or delay, in any manner, the right or power of
the Corporation to transfer any qualified financial
contract in accordance with paragraphs (9) and (10) of
this subsection or to disaffirm or repudiate any such
contract in accordance with paragraph (1).
``(G) Walkaway clauses not effective.--
``(i) In general.--Notwithstanding the
provisions of subparagraphs (A) and (E), and
sections 403 and 404 of the Federal Deposit
Insurance Corporation Improvement Act of 1991,
no walkaway clause shall be enforceable in a
qualified financial contract of an insured
depository institution in default.
``(ii) Walkaway clause defined.--For
purposes of this subparagraph, the term
`walkaway clause' means a provision in a
qualified financial contract that, after
calculation of a value of a party's position or
an amount due to or from 1 of the parties in
accordance with its terms upon termination,
liquidation, or acceleration of the qualified
financial contract, either does not create a
payment obligation of a party or extinguishes a
payment obligation of a party in whole or in
part solely because of such party's status as a
nondefaulting party.''.
(b) Technical and Conforming Amendment.--Section 11(e)(12)(A) of
the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(12)(A)) is amended
by inserting ``or the exercise of rights or powers'' after ``the
appointment''.
SEC. 4. AMENDMENTS RELATING TO TRANSFERS OF QUALIFIED FINANCIAL
CONTRACTS.
(a) Transfers of Qualified Financial Contracts to Financial
Institutions.--Section 11(e)(9) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)(9)) is amended to read as follows:
``(9) Transfer of qualified financial contracts.--
``(A) In general.--In making any transfer of assets
or liabilities of a depository institution in default
which includes any qualified financial contract, the
conservator or receiver for such depository institution
shall either--
``(i) transfer to 1 financial institution,
other than a financial institution for which a
conservator, receiver, trustee in bankruptcy,
or other legal custodian has been appointed or
which is otherwise the subject of a bankruptcy
or insolvency proceeding--
``(I) all qualified financial
contracts between any person or any
affiliate of such person and the
depository institution in default;
``(II) all claims of such person or
any affiliate of such person against
such depository institution under any
such contract (other than any claim
which, under the terms of any such
contract, is subordinated to the claims
of general unsecured creditors of such
institution);
``(III) all claims of such
depository institution against such
person or any affiliate of such person
under any such contract; and
``(IV) all property securing or any
other credit enhancement for any
contract described in subclause (I) or
any claim described in subclause (II)
or (III) under any such contract; or
``(ii) transfer none of the qualified
financial contracts, claims, property or other
credit enhancement referred to in clause (i)
(with respect to such person and any affiliate
of such person).
``(B) Transfer to foreign bank, foreign financial
institution, or branch or agency of a foreign bank or
financial institution.--In transferring any qualified
financial contracts and related claims and property
pursuant to subparagraph (A)(i), the conservator or
receiver for such depository institution shall not make
such transfer to a foreign bank, financial institution
organized under the laws of a foreign country, or a
branch or agency of a foreign bank or financial
institution unless, under the law applicable to such
bank, financial institution, branch or agency, to the
qualified financial contracts, and to any netting
contract, any security agreement or arrangement or
other credit enhancement related to 1 or more qualified
financial contracts, the contractual rights of the
parties to such qualified financial contracts, netting
contracts, security agreements or arrangements, or
other credit enhancements are enforceable substantially
to the same extent as permitted under this section.
``(C) Transfer of contracts subject to the rules of
a clearing organization.--In the event that a
conservator or receiver transfers any qualified
financial contract and related claims, property and
credit enhancements pursuant to subparagraph (A)(i) and
such contract is subject to the rules of a clearing
organization, the clearing organization shall not be
required to accept the transferee as a member by virtue
of the transfer.
``(D) Definition.--For purposes of this section,
the term `financial institution' means a broker or
dealer, a depository institution, a futures commission
merchant, or any other institution as determined by the
Corporation by regulation to be a financial
institution.''.
(b) Notice to Qualified Financial Contract Counterparties.--Section
11(e)(10)(A) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(10)(A)) is amended by amending the flush material following
clause (ii) to read as follows: ``the conservator or receiver shall
notify any person who is a party to any such contract of such transfer
by 5:00 p.m. (eastern time) on the business day following the date of
the appointment of the receiver, in the case of a receivership, or the
business day following such transfer, in the case of a
conservatorship.''.
(c) Rights Against Receiver and Treatment of Bridge Banks.--Section
11(e)(10) of the Federal Deposit Insurance Act (12 U.S.C. 1821(e)(10))
is further amended--
(1) by redesignating subparagraph (B) as subparagraph (D);
and
(2) by inserting after subparagraph (A) the following new
subparagraphs:
``(B) Certain rights not enforceable.--
``(i) Receivership.--A person who is a
party to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(A) or section 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991 solely by reason of or incidental to
the appointment of a receiver for the
depository institution (or the insolvency or
financial condition of the depository
institution for which the receiver has been
appointed)--
``(I) until 5:00 p.m. (eastern
time) on the business day following the
date of the appointment of the
receiver; or
``(II) after the person has
received notice that the contract has
been transferred pursuant to paragraph
(9)(A).
``(ii) Conservatorship.--A person who is a
party to a qualified financial contract with an
insured depository institution may not exercise
any right such person has to terminate,
liquidate, or net such contract under paragraph
(8)(E) or section 403 or 404 of the Federal
Deposit Insurance Corporation Improvement Act
of 1991, solely by reason of or incidental to
the appointment of a conservator for the
depository institution (or the insolvency or
financial condition of the depository
institution for which the conservator has been
appointed).
``(iii) Notice.--For purposes of this
subsection, the Corporation as receiver or
conservator of an insured depository
institution shall be deemed to have notified a
person who is a party to a qualified financial
contract with such depository institution if
the Corporation has taken steps reasonably
calculated to provide notice to such person by
the time specified in subparagraph (A) of this
subsection.
``(C) Treatment of bridge banks.--The following
institutions shall not be considered a financial
institution for which a conservator, receiver, trustee
in bankruptcy, or other legal custodian has been
appointed or which is otherwise the subject of a
bankruptcy or insolvency proceeding for purposes of
paragraph (9)--
``(i) a bridge bank; or
``(ii) a depository institution organized
by the Corporation, for which a conservator is
appointed either--
``(I) immediately upon the
organization of the institution; or
``(II) at the time of a purchase
and assumption transaction between such
institution and the Corporation as
receiver for a depository institution
in default.''.
SEC. 5. AMENDMENTS RELATING TO DISAFFIRMANCE OR REPUDIATION OF
QUALIFIED FINANCIAL CONTRACTS.
(a) In General.--Section 11(e) of the Federal Deposit Insurance Act
(12 U.S.C. 1821(e)) is further amended--
(1) by redesignating paragraphs (11) through (15) as
paragraphs (12) through (16), respectively; and
(2) by inserting after paragraph (10) the following new
paragraph:
``(11) Disaffirmance or repudiation of qualified financial
contracts.--In exercising the rights of disaffirmance or
repudiation of a conservator or receiver with respect to any
qualified financial contract to which an insured depository
institution is a party, the conservator or receiver for such
institution shall either--
``(A) disaffirm or repudiate all qualified
financial contracts between--
``(i) any person or any affiliate of such
person; and
``(ii) the depository institution in
default; or
``(B) disaffirm or repudiate none of the qualified
financial contracts referred to in subparagraph (A)
(with respect to such person or any affiliate of such
person).''.
(b) Technical and Conforming Amendments.--Section 11(e)(8) of the
Federal Deposit Insurance Act (12 U.S.C. 1821(e)(8)), as amended by
section 2(i), is further amended in subparagraph (C)(i), by striking
``(11)'' and inserting ``(12)''.
SEC. 6. CLARIFYING AMENDMENT RELATING TO MASTER AGREEMENTS.
Section 11(e)(8)(D)(vii) of the Federal Deposit Insurance Act (12
U.S.C. 1821(e)(8)(D)(vii)) is amended to read as follows:
``(vii) Treatment of master agreement as 1
agreement.--Any master agreement for any
contract or agreement described in any
preceding clause of this subparagraph (or any
master agreement for such master agreement or
agreements), together with all supplements to
such master agreement, shall be treated as a
single agreement and a single qualified
financial contract. If a master agreement
contains provisions relating to agreements or
transactions that are not themselves qualified
financial contracts, the master agreement shall
be deemed to be a qualified financial contract
only with respect to those transactions that
are themselves qualified financial
contracts.''.
SEC. 7. FEDERAL DEPOSIT INSURANCE CORPORATION IMPROVEMENT ACT OF 1991.
(a) Definitions.--Section 402 of the Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4402) is amended--
(1) in paragraph (2)--
(A) by inserting ``or exempt from such registration
pursuant to an order of the Securities and Exchange
Commission'' before the semicolon at the end of
subparagraph (A)(ii); and
(B) by inserting ``or that has been granted an
exemption pursuant to section 4(c)(1) of such Act''
before the period at the end of subparagraph (B);
(2) in paragraph (6)--
(A) by redesignating subparagraphs (B) through (D)
as subparagraphs (C) through (E), respectively;
(B) by inserting after subparagraph (A) the
following new subparagraph:
``(B) an uninsured national bank or an uninsured
State bank that is a member of the Federal Reserve
System if the national bank or State member bank is not
eligible to make application to become an insured bank
under section 5 of the Federal Deposit Insurance
Act;''; and
(C) by amending subparagraph (C) (as redesignated)
to read as follows:
``(C) a branch or agency of a foreign bank, a
foreign bank and any branch or agency of the foreign
bank, or the foreign bank that established the branch
or agency, as those terms are defined in section 1(b)
of the International Banking Act of 1978;'';
(3) in paragraph (11), by adding before the period ``and
any other clearing organization with which such clearing
organization has a netting contract'';
(4) by amending paragraph (14)(A)(i) to read as follows:
``(i) means a contract or agreement between
two or more financial institutions, clearing
organizations, or members that provides for
netting present or future payment obligations
or payment entitlements (including liquidation
or closeout values relating to such obligations
or entitlements) among the parties to the
agreement; and''; and
(5) by adding at the end the following new paragraph:
``(15) Payment.--The term `payment' means a payment of
United States dollars, another currency, or a composite
currency, and a noncash delivery, including a payment or
delivery to liquidate an unmatured obligation.''.
(b) Enforceability of Bilateral Netting Contracts.--Section 403 of
the Federal Deposit Insurance Corporation Improvement Act of 1991 (12
U.S.C. 4403) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act or any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment obligations and the
covered contractual payment entitlements between any two financial
institutions shall be netted in accordance with, and subject to the
conditions of, the terms of any applicable netting contract (except as
provided in section 561(b)(2) of title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(f) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two financial institutions
shall be enforceable in accordance with their terms (except as provided
in section 561(b)(2) of title 11, United States Code) and shall not be
stayed, avoided, or otherwise limited by any State or Federal law
(other than paragraphs (8)(E), (8)(F), and (10)(B) of section 11(e) of
the Federal Deposit Insurance Act and section 5(b)(2) of the Securities
Investor Protection Act of 1970).''.
(c) Enforceability of Clearing Organization Netting Contracts.--
Section 404 of the Federal Deposit Insurance Corporation Improvement
Act of 1991 (12 U.S.C. 4404) is amended--
(1) by amending subsection (a) to read as follows:
``(a) General Rule.--Notwithstanding any other provision of State
or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B) of
section 11(e) of the Federal Deposit Insurance Act and any order
authorized under section 5(b)(2) of the Securities Investor Protection
Act of 1970), the covered contractual payment obligations and the
covered contractual payment entitlements of a member of a clearing
organization to and from all other members of a clearing organization
shall be netted in accordance with and subject to the conditions of any
applicable netting contract (except as provided in section 561(b)(2) of
title 11, United States Code).''; and
(2) by adding at the end the following new subsection:
``(h) Enforceability of Security Agreements.--The provisions of any
security agreement or arrangement or other credit enhancement related
to 1 or more netting contracts between any two members of a clearing
organization shall be enforceable in accordance with their terms
(except as provided in section 561(b)(2) of title 11, United States
Code) and shall not be stayed, avoided, or otherwise limited by any
State or Federal law (other than paragraphs (8)(E), (8)(F), and (10)(B)
of section 11(e) of the Federal Deposit Insurance Act and section
5(b)(2) of the Securities Investor Protection Act of 1970).''.
(d) Enforceability of Contracts With Uninsured National Banks and
Uninsured Federal Branches and Agencies.--The Federal Deposit Insurance
Corporation Improvement Act of 1991 (12 U.S.C. 4401 et seq.) is
amended--
(1) by redesignating section 407 as section 407A; and
(2) by adding after section 406 the following new section:
``SEC. 407. TREATMENT OF CONTRACTS WITH UNINSURED NATIONAL BANKS AND
UNINSURED FEDERAL BRANCHES AND AGENCIES.
``(a) In General.--Notwithstanding any other provision of law,
paragraphs (8), (9), (10), and (11) of section 11(e) of the Federal
Deposit Insurance Act shall apply to an uninsured national bank or
uninsured Federal branch or Federal agency except--
``(1) any reference to the `Corporation as receiver' or
`the receiver or the Corporation' shall refer to the receiver
of an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
``(2) any reference to the `Corporation' (other than in
section 11(e)(8)(D) of such Act), the `Corporation, whether
acting as such or as conservator or receiver', a `receiver', or
a `conservator' shall refer to the receiver or conservator of
an uninsured national bank or uninsured Federal branch or
Federal agency appointed by the Comptroller of the Currency;
and
``(3) any reference to an `insured depository institution'
or `depository institution' shall refer to an uninsured
national bank or an uninsured Federal branch or Federal agency.
``(b) Liability.--The liability of a receiver or conservator of an
uninsured national bank or uninsured Federal branch or agency shall be
determined in the same manner and subject to the same limitations that
apply to receivers and conservators of insured depository institutions
under section 11(e) of the Federal Deposit Insurance Act.
``(c) Regulatory Authority.--
``(1) In general.--The Comptroller of the Currency, in
consultation with the Federal Deposit Insurance Corporation,
may promulgate regulations to implement this section.
``(2) Specific requirement.--In promulgating regulations to
implement this section, the Comptroller of the Currency shall
ensure that the regulations generally are consistent with the
regulations and policies of the Federal Deposit Insurance
Corporation adopted pursuant to the Federal Deposit Insurance
Act.
``(d) Definitions.--For purposes of this section, the terms
`Federal branch', `Federal agency', and `foreign bank' have the same
meaning as in section 1(b) of the International Banking Act.''.
SEC. 8. BANKRUPTCY CODE AMENDMENTS.
(a) Definitions of Forward Contract, Repurchase Agreement,
Securities Clearing Agency, Swap Agreement, Commodity Contract, and
Securities Contract.--Title 11, United States Code, is amended--
(1) in section 101--
(A) in paragraph (25)--
(i) by striking ``means a contract'' and
inserting ``means--
``(A) a contract'';
(ii) by striking ``, or any combination
thereof or option thereon;'' and inserting ``,
or any other similar agreement;''; and
(iii) by adding at the end the following:
``(B) any combination of agreements or transactions
referred to in subparagraphs (A) and (C);
``(C) any option to enter into an agreement or
transaction referred to in subparagraph (A) or (B);
``(D) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), or (C), together with all supplements to any
such master agreement, without regard to whether such
master agreement provides for an agreement or
transaction that is not a forward contract under this
paragraph, except that such master agreement shall be
considered to be a forward contract under this
paragraph only with respect to each agreement or
transaction under such master agreement that is
referred to in subparagraph (A), (B) or (C); or
``(E) any security agreement or arrangement, or
other credit enhancement related to any agreement or
transaction referred to in subparagraph (A), (B), (C),
or (D), but not to exceed the actual value of such
contract on the date of the filing of the petition;'';
(B) in paragraph (46), by striking ``on any day
during the period beginning 90 days before the date
of'' and inserting ``at any time before'';
(C) by amending paragraph (47) to read as follows:
``(47) `repurchase agreement' (which definition also
applies to a `reverse repurchase agreement')--
``(A) means--
``(i) an agreement, including related
terms, which provides for the transfer of 1 or
more certificates of deposit, mortgage-related
securities (as defined in the Securities
Exchange Act of 1934), mortgage loans,
interests in mortgage-related securities or
mortgage loans, eligible bankers' acceptances,
qualified foreign government securities, or
securities that are direct obligations of, or
that are fully guaranteed by, the United States
or any agency of the United States against the
transfer of funds by the transferee of such
certificates of deposit, eligible bankers'
acceptances, securities, loans, or interests,
with a simultaneous agreement by such
transferee to transfer to the transferor
thereof certificates of deposit, eligible
bankers' acceptance, securities, loans, or
interests of the kind described above, at a
date certain not later than 1 year after such
transfer or on demand, against the transfer of
funds;
``(ii) any combination of agreements or
transactions referred to in clauses (i) and
(iii);
``(iii) an option to enter into an
agreement or transaction referred to in clause
(i) or (ii);
``(iv) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), or (iii), together with all
supplements to any such master agreement,
without regard to whether such master agreement
provides for an agreement or transaction that
is not a repurchase agreement under this
paragraph, except that such master agreement
shall be considered to be a repurchase
agreement under this paragraph only with
respect to each agreement or transaction under
the master agreement that is referred to in
clause (i), (ii), or (iii); or
``(v) any security agreement or arrangement
or other credit enhancement related to any
agreement or transaction referred to in clause
(i), (ii), (iii), or (iv), but not to exceed
the actual value of such contract on the date
of the filing of the petition; and
``(B) does not include a repurchase obligation
under a participation in a commercial mortgage loan,
and, for purposes of this paragraph, the term `qualified
foreign government security' means a security that is a direct
obligation of, or that is fully guaranteed by, the central
government of a member of the Organization for Economic
Cooperation and Development;'';
(D) in paragraph (48) by inserting ``or exempt from
such registration under such section pursuant to an
order of the Securities and Exchange Commission'' after
``1934''; and
(E) by amending paragraph (53B) to read as follows:
``(53B) `swap agreement'--
``(A) means--
``(i) any agreement, including the terms
and conditions incorporated by reference in
such agreement, which is an interest rate swap,
option, future, or forward agreement, including
a rate floor, rate cap, rate collar, cross-
currency rate swap, and basis swap; a spot,
same day-tomorrow, tomorrow-next, forward, or
other foreign exchange or precious metals
agreement; a currency swap, option, future, or
forward agreement; an equity index or an equity
swap, option, future, or forward agreement; a
debt index or a debt swap, option, future, or
forward agreement; a credit spread or a credit
swap, option, future, or forward agreement; a
commodity index or a commodity swap, option,
future, or forward agreement; or a weather
swap, weather derivative, or weather option;
``(ii) any agreement or transaction similar
to any other agreement or transaction referred
to in this paragraph that--
``(I) is presently, or in the
future becomes, regularly entered into
in the swap market (including terms and
conditions incorporated by reference
therein); and
``(II) is a forward, swap, future,
or option on 1 or more rates,
currencies, commodities, equity
securities, or other equity
instruments, debt securities or other
debt instruments, or economic indices
or measures of economic risk or value;
``(iii) any combination of agreements or
transactions referred to in this paragraph;
``(iv) any option to enter into an
agreement or transaction referred to in this
paragraph;
``(v) a master agreement that provides for
an agreement or transaction referred to in
clause (i), (ii), (iii), or (iv), together with
all supplements to any such master agreement,
and without regard to whether the master
agreement contains an agreement or transaction
that is not a swap agreement under this
paragraph, except that the master agreement
shall be considered to be a swap agreement
under this paragraph only with respect to each
agreement or transaction under the master
agreement that is referred to in clause (i),
(ii), (iii), or (iv); or
``(B) any security agreement or arrangement or
other credit enhancement related to any agreements or
transactions referred to in subparagraph (A), but not
to exceed the actual value of such contract on the date
of the filing of the petition; and
``(C) is applicable for purposes of this title only
and shall not be construed or applied so as to
challenge or affect the characterization, definition,
or treatment of any swap agreement under any other
statute, regulation, or rule, including the Securities
Act of 1933, the Securities Exchange Act of 1934, the
Public Utility Holding Company Act of 1935, the Trust
Indenture Act of 1939, the Investment Company Act of
1940, the Investment Advisers Act of 1940, the
Securities Investor Protection Act of 1970, the
Commodity Exchange Act, and the regulations prescribed
by the Securities and Exchange Commission or the
Commodity Futures Trading Commission.'';
(2) by amending section 741(7) to read as follows:
``(7) `securities contract'--
``(A) means--
``(i) a contract for the purchase, sale, or
loan of a security, a certificate of deposit, a
mortgage loan or any interest in a mortgage
loan, a group or index of securities,
certificates of deposit or mortgage loans or
interests therein (including an interest
therein or based on the value thereof), or
option on any of the foregoing, including an
option to purchase or sell any such security,
certificate of deposit, loan, interest, group
or index, or option;
``(ii) any option entered into on a
national securities exchange relating to
foreign currencies;
``(iii) the guarantee by or to any
securities clearing agency of a settlement of
cash, securities, certificates of deposit,
mortgage loans or interests therein, group or
index of securities, or mortgage loans or
interests therein (including any interest
therein or based on the value thereof), or
option on any of the foregoing, including an
option to purchase or sell any such security,
certificate of deposit, loan, interest, group
or index, or option;
``(iv) any margin loan;
``(v) any other agreement or transaction
that is similar to an agreement or transaction
referred to in this paragraph;
``(vi) any combination of the agreements or
transactions referred to in this paragraph;
``(vii) any option to enter into any
agreement or transaction referred to in this
paragraph;
``(viii) a master agreement that provides
for an agreement or transaction referred to in
clause (i), (ii), (iii), (iv), (v), (vi), or
(vii), together with all supplements to any
such master agreement, without regard to
whether the master agreement provides for an
agreement or transaction that is not a
securities contract under this paragraph,
except that such master agreement shall be
considered to be a securities contract under
this paragraph only with respect to each
agreement or transaction under such master
agreement that is referred to in clause (i),
(ii), (iii), (iv), (v), (vi), or (vii); or
``(ix) any security agreement or
arrangement or other credit enhancement related
to any agreement or transaction referred to in
this paragraph, but not to exceed the actual
value of such contract on the date of the
filing of the petition; and
``(B) does not include any purchase, sale, or
repurchase obligation under a participation in a
commercial mortgage loan.''; and
(3) in section 761(4)--
(A) by striking ``or'' at the end of subparagraph
(D); and
(B) by adding at the end the following:
``(F) any other agreement or transaction that is
similar to an agreement or transaction referred to in
this paragraph;
``(G) any combination of the agreements or
transactions referred to in this paragraph;
``(H) any option to enter into an agreement or
transaction referred to in this paragraph;
``(I) a master agreement that provides for an
agreement or transaction referred to in subparagraph
(A), (B), (C), (D), (E), (F), (G), or (H), together
with all supplements to such master agreement, without
regard to whether the master agreement provides for an
agreement or transaction that is not a commodity
contract under this paragraph, except that the master
agreement shall be considered to be a commodity
contract under this paragraph only with respect to each
agreement or transaction under the master agreement
that is referred to in subparagraph (A), (B), (C), (D),
(E), (F), (G), or (H); or
``(J) any security agreement or arrangement or
other credit enhancement related to any agreement or
transaction referred to in this paragraph, but not to
exceed the actual value of such contract on the date of
the filing of the petition;''.
(b) Definitions of Financial Institution, Financial Participant,
and Forward Contract Merchant.--Section 101 of title 11, United States
Code, is amended--
(1) by striking paragraph (22) and inserting the following
new paragraph:
``(22) the term `financial institution'--
``(A) means a Federal reserve bank or an entity
(domestic or foreign) that is a commercial or savings
bank, industrial savings bank, savings and loan
association, trust company, a bank or a corporation
organized under section 25A of the Federal Reserve Act
and, when any such bank or entity is acting as agent or
custodian for a customer in connection with a
securities contract, as defined in section 741, such
customer; and
``(B) includes any person described in subparagraph
(A) which operates, or operates as, a multilateral
clearing organization pursuant to section 409 of the
Federal Deposit Insurance Corporation Improvement Act
of 1991;'';
(2) by inserting after paragraph (22) the following:
``(22A) `financial participant' means an entity that, at
the time it enters into a securities contract, commodity
contract or forward contract, or at the time of the filing of
the petition, has 1 or more agreements or transactions
described in paragraph (1), (2), (3), (4), (5), or (6) of
section 561(a) with the debtor or any other entity (other than
an affiliate) of a total gross dollar value of at least
$1,000,000,000 in notional or actual principal amount
outstanding on any day during the previous 15-month period, or
has gross mark-to-market positions of at least $100,000,000
(aggregated across counterparties) in 1 or more such agreement
or transaction with the debtor or any other entity (other than
an affiliate) on any day during the previous 15-month
period;''; and
(3) by amending paragraph (26) to read as follows:
``(26) `forward contract merchant' means a Federal reserve
bank, or an entity whose business consists in whole or in part
of entering into forward contracts as or with merchants or in a
commodity, as defined or in section 761, or any similar good,
article, service, right, or interest which is presently or in
the future becomes the subject of dealing or in the forward
contract trade;''.
(c) Definition of Master Netting Agreement and Master Netting
Agreement Participant.--Section 101 of title 11, United States Code, is
amended by inserting after paragraph (38) the following new paragraphs:
``(38A) `master netting agreement' means an agreement
providing for the exercise of rights, including rights of
netting, setoff, liquidation, termination, acceleration, or
closeout, under or in connection with 1 or more contracts that
are described in any 1 or more of paragraphs (1) through (5) of
section 561(a), or any security agreement or arrangement or
other credit enhancement related to 1 or more of the foregoing.
If a master netting agreement contains provisions relating to
agreements or transactions that are not contracts described in
paragraphs (1) through (5) of section 561(a), the master
netting agreement shall be deemed to be a master netting
agreement only with respect to those agreements or transactions
that are described in any 1 or more of the paragraphs (1)
through (5) of section 561(a);
``(38B) `master netting agreement participant' means an
entity that, at any time before the filing of the petition, is
a party to an outstanding master netting agreement with the
debtor;''.
(d) Swap Agreements, Securities Contracts, Commodity Contracts,
Forward Contracts, Repurchase Agreements, and Master Netting Agreements
Under the Automatic-Stay.--
(1) In general.--Section 362(b) of title 11, United States
Code, is amended--
(A) in paragraph (6), by inserting ``, pledged to
and under the control of,'' after ``held by'';
(B) in paragraph (7), by inserting ``, pledged to
and under the control of,'' after ``held by'';
(C) by amending paragraph (17) to read as follows:
``(17) under subsection (a), of the setoff by a swap
participant of a mutual debt and claim under or in connection
with 1 or more swap agreements that constitutes the setoff of a
claim against the debtor for any payment or other transfer of
property due from the debtor under or in connection with any
swap agreement against any payment due to the debtor from the
swap participant under or in connection with any swap agreement
or against cash, securities, or other property held by, pledged
to and under the control of, or due from such swap participant
to margin, guarantee, secure, or settle any swap agreement;'';
(D) in paragraph (18) by striking the period at the
end and inserting ``; or''; and
(E) by inserting after paragraph (18) the following
new paragraph:
``(19) under subsection (a), of the setoff by a master
netting agreement participant of a mutual debt and claim under
or in connection with 1 or more master netting agreements or
any contract or agreement subject to such agreements that
constitutes the setoff of a claim against the debtor for any
payment or other transfer of property due from the debtor under
or in connection with such agreements or any contract or
agreement subject to such agreements against any payment due to
the debtor from such master netting agreement participant under
or in connection with such agreements or any contract or
agreement subject to such agreements or against cash,
securities, or other property held by, pledged to and under the
control of, or due from such master netting agreement
participant to margin, guarantee, secure, or settle such
agreements or any contract or agreement subject to such
agreements, to the extent such participant is eligible to
exercise such offset rights under paragraph (6), (7), or (17)
for each individual contract covered by the master netting
agreement in issue.''.
(2) Limitation.--Section 362 of title 11, United States
Code, is amended by adding at the end the following:
``(i) Limitation.--The exercise of rights not subject to the stay
arising under subsection (a) pursuant to paragraph (6), (7), or (17),
or (32) of subsection (b) shall not be stayed by any order of a court
or administrative agency in any proceeding under this title.''.
(e) Limitation of Avoidance Powers Under Master Netting
Agreement.--Section 546 of title 11, United States Code, is amended--
(1) in subsection (g) (as added by section 103 of Public
Law 101-311)--
(A) by striking ``under a swap agreement''; and
(B) by striking ``in connection with a swap
agreement'' and inserting ``under or in connection with
any swap agreement''; and
(2) by adding at the end the following:
``(j) Notwithstanding sections 544, 545, 547, 548(a)(1)(B), and
548(b), the trustee may not avoid a transfer made by or to a master
netting agreement participant under or in connection with any master
netting agreement or any individual contract covered thereby that is
made before the commencement of the case, except under section
548(a)(1)(A), and except to the extent the trustee could otherwise
avoid such a transfer made under an individual contract covered by such
master netting agreement.''.
(f) Fraudulent Transfers of Master Netting Agreements.--Section
548(d)(2) of title 11, United States Code, is amended--
(1) in subparagraph (C), by striking ``and'';
(2) in subparagraph (D), by striking the period and
inserting ``; and''; and
(3) by adding at the end the following new subparagraph:
``(E) a master netting agreement participant that receives
a transfer in connection with a master netting agreement or any
individual contract covered thereby takes for value to the
extent of such transfer, except, with respect to a transfer
under any individual contract covered thereby, to the extent
such master netting agreement participant otherwise did not
take (or is otherwise not deemed to have taken) such transfer
for value.''.
(g) Termination or Acceleration of Securities Contracts.--Section
555 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 555. Contractual right to liquidate, terminate, or accelerate a
securities contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(h) Termination or Acceleration of Commodities or Forward
Contracts.--Section 556 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward contract'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(i) Termination or Acceleration of Repurchase Agreements.--Section
559 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement'';
and
(2) in the first sentence, by striking ``liquidation'' and
inserting ``liquidation, termination, or acceleration''.
(j) Liquidation, Termination, or Acceleration of Swap Agreements.--
Section 560 of title 11, United States Code, is amended--
(1) by amending the section heading to read as follows:
``Sec. 560. Contractual right to liquidate, terminate, or accelerate a
swap agreement'';
(2) in the first sentence, by striking ``termination of a
swap agreement'' and inserting ``liquidation, termination, or
acceleration of 1 or more swap agreements''; and
(3) by striking ``in connection with any swap agreement''
and inserting ``in connection with the termination,
liquidation, or acceleration of 1 or more swap agreements''.
(k) Liquidation, Termination, Acceleration, or Offset Under a
Master Netting Agreement and Across Contracts.--(1) Title 11, United
States Code, is amended by inserting after section 560 the following:
``Sec. 561. Contractual right to terminate, liquidate, accelerate, or
offset under a master netting agreement and across
contracts
``(a) In General.--Subject to subsection (b), the exercise of any
contractual right, because of a condition of the kind specified in
section 365(e)(1), to cause the termination, liquidation, or
acceleration of or to offset or net termination values, payment amounts
or other transfer obligations arising under or in connection with 1 or
more (or the termination, liquidation, or acceleration of 1 or more)--
``(1) securities contracts, as defined in section 741(7);
``(2) commodity contracts, as defined in section 761(4);
``(3) forward contracts;
``(4) repurchase agreements;
``(5) swap agreements; or
``(6) master netting agreements,
shall not be stayed, avoided, or otherwise limited by operation of any
provision of this title or by any order of a court or administrative
agency in any proceeding under this title.
``(b) Exception.--
``(1) A party may exercise a contractual right described in
subsection (a) to terminate, liquidate, or accelerate only to
the extent that such party could exercise such a right under
section 555, 556, 559, or 560 for each individual contract
covered by the master netting agreement in issue.
``(2) If a debtor is a commodity broker subject to
subchapter IV of chapter 7--
``(A) a party may not net or offset an obligation
to the debtor arising under, or in connection with, a
commodity contract against any claim arising under, or
in connection with, other instruments, contracts, or
agreements listed in subsection (a), except to the
extent the party has positive net equity in the
commodity accounts at the debtor, as calculated under
such subchapter; and
``(B) another commodity broker may not net or
offset an obligation to the debtor arising under, or in
connection with, a commodity contract entered into or
held on behalf of a customer of the debtor against any
claim arising under, or in connection with, other
instruments, contracts, or agreements listed in
subsection (a).
``(c) Rule of Application.--Subparagraphs (A) and (B) of subsection
(b)(2) shall not be construed as prohibiting the offset of claims and
obligations arising pursuant to--
``(1) a cross-margining arrangement that has been approved
by the Commodity Futures Trading Commission or that has been
submitted to such Commission pursuant to section 5a(a)(12) of
the Commodity Exchange Act and has been permitted to go into
effect; or
``(2) another netting arrangement, between a clearing
organization (as defined in section 761) and another entity,
that has been approved by the Commodity Futures Trading
Commission.
``(d) Definition.--As used in this section, the term `contractual
right' includes a right set forth in a rule or bylaw of a national
securities exchange, a national securities association, or a securities
clearing agency, a right set forth in a bylaw of a clearing
organization or contract market or in a resolution of the governing
board thereof, and a right, whether or not evidenced in writing,
arising under common law, under law merchant, or by reason of normal
business practice.''.
(2) Conforming amendment.--The table of sections of chapter 5 of
title 11, United States Code, is amended by inserting after the item
relating to section 560 the following:
``561. Contractual right to terminate, liquidate, accelerate, or offset
under a master netting agreement and across
contracts.''.
(l) Municipal Bankruptcies.--Section 901(a) of title 11, United
States Code, is amended--
(1) by inserting ``555, 556,'' after ``553,''; and
(2) by inserting ``559, 560, 561, 562,'' after ``557,''.
(m) Ancillary Proceedings.--Section 304 of title 11, United States
Code, is amended by adding at the end the following new subsection:
``(d) Any provisions of this title relating to securities
contracts, commodity contracts, forward contracts, repurchase
agreements, swap agreements, or master netting agreements shall apply
in a case ancillary to a foreign proceeding under this section or any
other section of this title so that enforcement of contractual
provisions of such contracts and agreements in accordance with their
terms will not be stayed or otherwise limited by operation of any
provision of this title or by order of a court in any proceeding under
this title, and to limit avoidance powers to the same extent as in a
proceeding under chapter 7 or 11 (such enforcement not to be limited
based on the presence or absence of assets of the debtor in the United
States).''.
(n) Commodity Broker Liquidations.--Title 11, United States Code,
is amended by inserting after section 766 the following:
``Sec. 767. Commodity broker liquidation and forward contract
merchants, commodity brokers, stockbrokers, financial
institutions, financial participants, securities clearing
agencies, swap participants, repo participants, and
master netting agreement participants
``Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker,
stockbroker, financial institution, financial participant, securities
clearing agency, swap participant, repo participant, or master netting
agreement participant under this title shall not affect the priority of
any unsecured claim it may have after the exercise of such rights.''.
(o) Stockbroker Liquidations.--Title 11, United States Code, is
amended by inserting after section 752 the following:
``Sec. 753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial institutions,
financial participants, securities clearing agencies,
swap participants, repo participants, and master netting
agreement participants
``Notwithstanding any other provision of this title, the exercise
of rights by a forward contract merchant, commodity broker,
stockbroker, financial institution, securities clearing agency, swap
participant, repo participant, financial participant, or master netting
agreement participant under this title shall not affect the priority of
any unsecured claim it may have after the exercise of such rights.''.
(p) Setoff.--Section 553 of title 11, United States Code, is
amended--
(1) in subsection (a)(3)(C), by inserting ``(except for a
setoff of a kind described in section 362(b)(6), 362(b)(7),
362(b)(17), 362(b)(32), 555, 556, 559, 560 or 561)'' before the
period; and
(2) in subsection (b)(1), by striking ``362(b)(14)'' and
inserting ``362(b)(17), 362(b)(32), 555, 556, 559, 560, 561''.
(q) Securities Contracts, Commodity Contracts, and Forward
Contracts.--Title 11, United States Code, is amended--
(1) in section 362(b)(6), by striking ``financial
institutions,'' each place such term appears and inserting
``financial institution, financial participant'';
(2) in section 546(e), by inserting ``financial
participant,'' after ``financial institution,'';
(3) in section 548(d)(2)(B), by inserting ``financial
participant,'' after ``financial institution,'';
(4) in section 555--
(A) by inserting ``financial participant,'' after
``financial institution,''; and
(B) by inserting before the period at the end ``, a
right set forth in a bylaw of a clearing organization
or contract market or in a resolution of the governing
board thereof, and a right, whether or not in writing,
arising under common law, under law merchant, or by
reason of normal business practice''; and
(5) in section 556, by inserting ``, financial
participant'' after ``commodity broker''.
(r) Conforming Amendments.--Title 11, United States Code, is
amended--
(1) in the table of sections of chapter 5--
(A) by amending the items relating to sections 555
and 556 to read as follows:
``555. Contractual right to liquidate, terminate, or accelerate a
securities contract.
``556. Contractual right to liquidate, terminate, or accelerate a
commodities contract or forward
contract.'';
and
(B) by amending the items relating to sections 559
and 560 to read as follows:
``559. Contractual right to liquidate, terminate, or accelerate a
repurchase agreement.
``560. Contractual right to liquidate, terminate, or accelerate a swap
agreement.'';
and
(2) in the table of sections of chapter 7--
(A) by inserting after the item relating to section
766 the following:
``767. Commodity broker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants,
securities clearing agencies, swap
participants, repo participants, and master
netting agreement participants.'';
and
(B) by inserting after the item relating to section
752 the following:
``753. Stockbroker liquidation and forward contract merchants,
commodity brokers, stockbrokers, financial
institutions, financial participants,
securities clearing agencies, swap
participants, repo participants, and master
netting agreement participants.''.
SEC. 9. RECORDKEEPING REQUIREMENTS.
Section 11(e)(8) of the Federal Deposit Insurance Act (12 U.S.C.
1821(e)(8)) is amended by adding at the end the following new
subparagraph:
``(H) Recordkeeping requirements.--The Corporation,
in consultation with the appropriate Federal banking
agencies, may prescribe regulations requiring more
detailed recordkeeping with respect to qualified
financial contracts (including market valuations) by
insured depository institutions.''.
SEC. 10. EXEMPTIONS FROM CONTEMPORANEOUS EXECUTION REQUIREMENT.
Section 13(e)(2) of the Federal Deposit Insurance Act (12 U.S.C.
1823(e)(2)) is amended to read as follows:
``(2) Exemptions from contemporaneous execution
requirement.--An agreement to provide for the lawful
collateralization of--
``(A) deposits of, or other credit extension by, a
Federal, State, or local governmental entity, or of any
depositor referred to in section 11(a)(2), including an
agreement to provide collateral in lieu of a surety
bond;
``(B) bankruptcy estate funds pursuant to section
345(b)(2) of title 11, United States Code;
``(C) extensions of credit, including any
overdraft, from a Federal reserve bank or Federal home
loan bank; or
``(D) 1 or more qualified financial contracts, as
defined in section 11(e)(8)(D),
shall not be deemed invalid pursuant to paragraph (1)(B) solely
because such agreement was not executed contemporaneously with
the acquisition of the collateral or because of pledges,
delivery, or substitution of the collateral made in accordance
with such agreement.''.
SEC. 11. DAMAGE MEASURE.
(a) In General.--Title 11, United States Code, is amended--
(1) by inserting after section 561 the following:
``Sec. 562. Damage measure in connection with swap agreements,
securities contracts, forward contracts, commodity
contracts, repurchase agreements, or master netting
agreements
``If the trustee rejects a swap agreement, securities contract as
defined in section 741, forward contract, commodity contract (as
defined in section 761) repurchase agreement, or master netting
agreement pursuant to section 365(a), or if a forward contract
merchant, stockbroker, financial institution, securities clearing
agency, repo participant, financial participant, master netting
agreement participant, or swap participant liquidates, terminates, or
accelerates such contract or agreement, damages shall be measured as of
the earlier of--
``(1) the date of such rejection; or
``(2) the date of such liquidation, termination, or
acceleration.''; and
(2) in the table of sections of chapter 5 by inserting
after the item relating to section 561 the following:
``562. Damage measure in connection with swap agreements, securities
contracts, forward contracts, commodity
contracts, repurchase agreements, or master
netting agreements.''.
(b) Claims Arising From Rejection.--Section 502(g) of title 11,
United States Code, is amended--
(1) by designating the existing text as paragraph (1); and
(2) by adding at the end the following:
``(2) A claim for damages calculated in accordance with section 562
shall be allowed under subsection (a), (b), or (c), or disallowed under
subsection (d) or (e), as if such claim had arisen before the date of
the filing of the petition.''.
SEC. 12. SIPC STAY.
Section 5(b)(2) of the Securities Investor Protection Act of 1970
(15 U.S.C. 78eee(b)(2)) is amended by adding after subparagraph (B) the
following new subparagraph:
``(C) Exception from stay.--
``(i) Notwithstanding section 362 of title
11, United States Code, neither the filing of
an application under subsection (a)(3) nor any
order or decree obtained by the Securities
Investor Protection Corporation from the court
shall operate as a stay of any contractual
rights of a creditor to liquidate, terminate,
or accelerate a securities contract, commodity
contract, forward contract, repurchase
agreement, swap agreement, or master netting
agreement, each as defined in title 11 United
States Code, to offset or net termination
values, payment amounts, or other transfer
obligations arising under or in connection with
1 or more of such contracts or agreements, or
to foreclose on any cash collateral pledged by
the debtor whether or not with respect to 1 or
more of such contracts or agreements.
``(ii) Notwithstanding clause (i), such
application, order, or decree may operate as a
stay of the foreclosure on or disposition of
securities collateral pledged by the debtor,
whether or not with respect to 1 or more of
such contracts or agreements, securities sold
by the debtor under a repurchase agreement or
securities lent under a securities lending
agreement.
``(iii) As used in this section, the term
`contractual right' includes a right set forth
in a rule or bylaw of a national securities
exchange, a national securities association, or
a securities clearing agency, a right set forth
in a bylaw of a clearing organization or
contract market or in a resolution of the
governing board thereof, and a right, whether
or not in writing, arising under common law,
under law merchant, or by reason of normal
business practice.''.
SEC. 13. ASSET-BACKED SECURITIZATIONS.
Section 541 of title 11, United States Code, is amended--
(1) in subsection (b)--
(A) by striking ``or'' at the end of paragraph
(4)(B)(ii);
(B) by redesignating paragraph (5) as paragraph
(6); and
(C) by inserting after paragraph (4) the following
new paragraph:
``(5) any eligible asset (or proceeds thereof), to the
extent that such eligible asset was transferred by the debtor
before the date of commencement of the case, to an eligible
entity in connection with an asset-backed securitization,
except to the extent such asset (or proceeds or value thereof)
may be recovered by the trustee under section 550 by virtue of
avoidance under section 548(a)(1); or''; and
(2) by adding at the end the following new subsection:
``(e) For purposes of this section, the following definitions shall
apply:
``(1) the term `asset-backed securitization' means a
transaction in which eligible assets transferred to an eligible
entity are used as the source of payment on securities,
including all securities issued by governmental units, at least
1 class or tranche of which is rated investment grade by 1 or
more nationally recognized securities rating organizations,
when the securities are initially issued by an issuer;
``(2) the term `eligible asset' means--
``(A) financial assets (including interests therein
and proceeds thereof), either fixed or revolving,
whether or not such assets are in existence as of the
date of the transfer, including residential and
commercial mortgage loans, consumer receivables, trade
receivables, assets of governmental units (including
payment obligations relating to taxes, receipts, fines,
tickets, and other sources of revenue), and lease
receivables, that, by their terms, convert into cash
within a finite time period, plus any residual interest
in property subject to receivables included in such
financial assets plus any rights or other assets
designed to assure the servicing or timely distribution
of proceeds to security holders;
``(B) cash; and
``(C) securities, including all securities issued
by governmental units.
``(3) the term `eligible entity' means--
``(A) an issuer; or
``(B) a trust, corporation, partnership,
governmental unit, limited liability company (including
a single member limited liability company), or other
entity engaged exclusively in the business of acquiring
and transferring eligible assets directly or indirectly
to an issuer and taking actions ancillary thereto;
``(4) the term `issuer' means a trust, corporation,
partnership, governmental unit, limited liability company
(including a single member limited liability company), or other
entity engaged exclusively in the business of acquiring and
holding eligible assets, issuing securities backed by eligible
assets, and taking actions ancillary thereto; and
``(5) the term `transferred' means the debtor, pursuant to
a written agreement, represented and warranted that eligible
assets were sold, contributed, or otherwise conveyed with the
intention of removing them from the estate of the debtor
pursuant to subsection (b)(5) (whether or not reference is made
to this title or any section of this title), irrespective,
without limitation, of--
``(A) whether the debtor directly or indirectly
obtained or held an interest in the issuer or in any
securities issued by the issuer;
``(B) whether the debtor had an obligation to
repurchase or to service or supervise the servicing of
all or any portion of such eligible assets; or
``(C) the characterization of such sale,
contribution, or other conveyance for tax, accounting,
regulatory reporting, or other purposes.''.
SEC. 14. APPLICATION OF AMENDMENTS.
The amendments made by this Act shall apply with respect to cases
commenced or appointments made under any Federal or State law after the
date of the enactment of this Act, but shall not apply with respect to
cases commenced or appointments made under any Federal or State law
before the date of the enactment of this Act.
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