ISDA Revises Universal Resolution Stay Protocols

ISDA published the 2015 ISDA Universal Resolution Stay Protocol (the "2015 ISDA Protocol") which "enables parties to amend the terms of their Protocol Covered Agreements to contractually recognize the cross-border application of special resolution regimes applicable to certain financial companies and support the resolution of certain financial companies under the United States Bankruptcy Code." In addition, SIFMA, the International Capital Market Association ("ICMA") and the International Securities Lending Association ("ISLA"), in coordination with ISDA and the Financial Stability Board, announced the development of a Securities Financing Transactions ("SFT") annex to the 2015 ISDA Protocol. Changes to the 2015 ISDA Protocol are intended to impose short-term stays on non-defaulting parties in the event of insolvencies by certain counterparty banks. These delays are meant to allow regulators to step in and conduct "orderly resolutions" of the failing banks. The SFT Annex expands the 2015 ISDA Protocols to cover securities financing master agreements.

The 2015 ISDA Protocol replaces the "nearly identical" ISDA 2014 Resolution Stay Protocol (the "2014 ISDA Protocol"), but is designed to be used in connection with the SFT Annex. ISDA also noted that "the buyside generally will not adhere to the ISDA 2015 Universal [Resolution Stay] Protocol, but instead to the ISDA Resolution Stay Jurisdictional Modular Protocol," which ISDA expects to publish "in the near future." ISDA specified that the ISDA Resolution Stay Jurisdictional Modular Protocol will be a "separate and standalone protocol" that will "aim . . . [to] achiev[e] an outcome substantially similar to the outcome under Section 1 of the [2015 ISDA Protocol], which results in counterparties to financial institutions consenting to be subject to stays on or overrides of certain termination rights under Special Resolution Regimes, notwithstanding the governing law of their agreements."