On September 12, 2017, the Board of Governors of the Federal Reserve System (the “Board”) published in the Federal Register final rules (the “Final Rules”) intended to reduce the potential risks posed to the U.S. financial system by banks deemed too big to fail. The Final Rules will impose restrictions on certain non-cleared financial contracts entered into by U.S. global systemically important banking organizations (“GSIBs”) and their subsidiaries, as well as the U.S. operations of foreign GSIBs (other than subsidiaries or operations subject to regulation by another banking regulator) (collectively, “covered entities”). These restrictions will significantly limit counterparty default rights in over-the-counter derivatives, repurchase and reverse repurchase agreements, securities lending and borrowing transactions, commodity contracts and forward agreements (such transactions and agreements, “qualified financial contracts” or “QFCs”). The Final Rules are largely similar to the rules proposed by the Board in May 2016 (the “Proposed Rules”), but with a few significant differences, discussed below, primarily intended to alleviate their burden.

Goals of the Final Rules -

The Proposed Rules had two primary goals, both aimed at facilitating the orderly liquidation of systemically important financial institutions, including under the orderly liquidation process created under Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). The Final Rules seek to effectuate these same goals.