New rules that will delay swaps termination rights and collateral demands were signed by 18 major banks, the International Swaps and Derivatives Association announced Wednesday.
The banks initially agreed in principle to the ISDA 2014 Resolution Stay Protocol on Oct. 11.
The signatory banks are Bank of America Corp., Bank of Tokyo-Mitsubishi UFJ, Barclays PLC, BNP Paribas, Citigroup Inc., Credit Agricole, Credit Suisse Group, Deutsche Bank AG, Goldman Sachs & Co., HSBC PLC, J.P. Morgan Chase & Co., Mizuho Financial Group, Morgan Stanley, Nomura Holdings, Royal Bank of Scotland PLC, Societe Generale, Sumitomo Mitsui Financial Group and UBS AG.
The delay on cross-default and early termination rights within standard ISDA derivatives contracts is intended to give regulators time to facilitate an orderly resolution of a troubled bank. The rules will take effect Jan. 1 for those 18 banks and will be applied to new and existing trades between parties.
Regulators in several countries have committed to develop new regulations in 2015 to broadly adopt the stay provisions beyond the 18 banks, according to the ISDA.
Those banks will extend the coverage of stays to more than 90% of their outstanding notional derivatives.
Delays in domestic swap wind-downs already are in force in the U.S. through the Dodd-Frank Wall Street Reform and Consumer Protection Act. The ISDA protocol would extend to the largest banks in Europe and Asia as well, once their regulators adopt the protocols.
It was developed by an ISDA working group that included both buy- and sell-side participants, in cooperation with the Financial Stability Board.
Details on the protocol are on the ISDA website.