- Nov 27, 2020
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In the United States, the Federal Reserve has amended its risk-based capital guidelines to recognize the reductive benefits of clearing agreements15 and to implement the recommendations of the Basel Committee on Banking Supervision. The Federal Reserve requires that the banking organization have the written and reasoned legal advice described above, which concludes a « high degree of security, » that the compensation contract be subject to legal challenge in any applicable jurisdiction. 16 Notices may be drawn up either by an outside law firm or by an in-house lawyer. The agreement and notice of compensation (and, if applicable, English translations) must be made available to the Federal Reserve for consultation17. 18 In 1995, the Federal Reserve issued its EE Regulation in accordance with the provisions of the Federal Deposit Insurance Corporation Investment Act.8 The EE Regulation extends the definition of the financial institution to a qualitative and quantitative test.9 The entity must, each day during the previous 15-month period, enter into budgetary policy contracts as a counterpart on both sides of one or more financial markets. 11 The Federal Reserve stated that the test could apply to both the United States and non-U.S. countries. Entities. The term « financial contract » includes spot contracts, futures and foreign currency options, as well as exchange contracts, pension contracts, securities contracts, etc.12.
These concepts have been included in the documentation, known in many types of bargaining contracts as master contracts. These are master`s agreements, as they constitute a series of individual bookings, all grouped under contract. Agreements on spot and futures foreign exchange transactions as well as for foreign exchange options generally follow the same structure. An agreement on cash and forward futures transactions covers transaction terms, confirmations, innovation clearing and settlements. An agreement on exchange options deals with the terms of the option, the payment of the premium, confirmations, the exercise of options, the settlement and the taxation. Currency cash and forward futures agreements and exchange option agreements contain defaults that give the non-defaulting party the right to enter into and network open transactions. The problem is the uncertainty as to whether the bankruptcy system will be the same in each country. The BCCI case has shown that there are two different types of bankruptcy schemes, the local and the universal.
Under the local bankruptcy scheme, the subsidiary of the foreign bank may be liquidated as a separate entity. Therefore, the representative of Jurisdiction Z of the bank B branch would regard this obligation of Bank A as a separate obligation that cannot be charged at the central level.