Another element of our efforts to promote resolvability of large banking organizations involves the early termination rights of derivative counterparties to GSIBs. Some of the material operating subsidiaries of GSIBs are counterparties to large volumes of over-thecounter derivatives and other qualifying financial contracts that provide for an event of default based solely on the insolvency or receivership of the parent holding company.
Although the Dodd-Frank Act created an orderly liquidation authority (OLA) to better enable the government to resolve a failed systemically important financial firm – and the OLA’s stay and transfer provisions can prevent exercise of such contractual rights by counterparties to contracts under U.S. law – the OLA provisions may not apply to contracts under foreign law.