stakeholders left behind in a receivership on a relative priority basis, rather than pursuant to an absolute priority rule. o
Administrative or Judicial Review. The FDIC should propose an efficient procedure that provides all claimants left behind in a receivership with a fair opportunity to challenge the FDIC over whether the FDIC satisfied its various statutory and regulatory duties in resolving a covered company. This would include whether claimants were entitled to receive at least the liquidation value of their claims and did in fact receive at least such liquidation value, as well as an appropriate and effective remedy against the FDIC for any breach of such duties.
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Cross-Border Cooperation. The FDIC should explain what it will do to foster cross-border cooperation, including:
Ring-Fencing. Prevent host-country ring-fencing when a SIFI’s toptier holding company is being resolved in an OLA proceeding, and U.S. ring-fencing when a SIFI’s top-tier holding company is being resolved in a foreign resolution proceeding.
Cross-Defaults. Encourage host countries to enact laws similar to Section 210(c)(16) of the Dodd-Frank Act, which would override contractual termination rights in financial contracts that arise solely because of the failure and resolution of a counterparty’s parent holding company or another affiliate, provided that any related parent guarantees are assumed by a creditworthy bridge financial company or third party within a specified period of time.
Cooperation Agreements. Enter into cooperation agreements in advance with foreign regulators. The FDIC’s progress with the Bank of England is an excellent model for the FDIC to build upon with other foreign regulators.
Recognition of U.S. and Foreign Resolution Proceedings. Encourage host countries to recognize and give effect to resolution proceedings under OLA, including the distribution of equity in a bridge financial company in satisfaction of the claims of stakeholders left behind in a receivership and provisions that permit the transfer of financial contracts, or related guarantees, to bridge financial companies or limit the early termination of financial contracts. Help increase the certainty that U.S. courts will recognize and give effect to foreign resolution proceedings by urging Congress to amend Chapter 15 of the Bankruptcy Code to require U.S. courts to recognize and give effect to foreign resolution proceedings, including with respect to a foreign bank with a branch or agency in the United States, if the stated conditions of Chapter 15 are satisfied.
Too Big to Fail: The Path to a Solution | 10