G-18 Banks Agree to Sign ISDA Resolution Stay Protocol

ISDA announced that 18 major global banks ("G-18 banks") agreed to sign a new ISDA resolution. The Stay Protocol ("the Protocol") will impose a stay on cross-default and early termination rights within standard ISDA derivatives contracts between G-18 banks in the event that one of them is subject to resolution action in its jurisdiction.According to ISDA, the stay is intended to give regulators time to facilitate an orderly resolution of a troubled bank.

The Protocol is intended to enable adhering counterparties to opt into certain overseas resolution regimes via a change to their derivatives contracts. While certain existing national resolution frameworks impose stays on early termination rights following the start of resolution proceedings, these stays might only apply to domestic counterparties trading under domestic law agreements and so not capture cross-border trades.

The Protocol was developed in coordination with the Financial Stability Board to "support cross-border resolution and reduce systemic risk."

The Protocol will take effect on January 1, 2015 and will govern both new and existing trades between the 18 adhering institutions and certain of their subsidiaries.

See:ISDA Press Release; Resolution Stay Protocol - Background.See also:FRB Press Release; FDIC Press Release; SIFMA Statement.