HOENIG URGES BANKS TO CHANGE DERIVATIVES CONTRACTS
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Posted On: 08/14/2014 10:03:48 AM
HOENIG URGES BANKS TO CHANGE DERIVATIVES CONTRACTS
Reuters’ Douwe Miedema and Emily Stephenson: “Banks need to urgently change a provision in derivatives contracts that prevents them from smoothly winding down their business if they start failing during a crisis, a top U.S. regulator told Reuters on Wednesday. Thomas Hoenig, second in command at the Federal Deposit Insurance Corp, said the so-called early termination rights were the most pressing problem regulators found last week with documents that show how banks can go through bankruptcy court during a crisis that threatens their solvency. The documents are known as ‘living wills’ and are seen as a critical step in avoiding future government bailouts.
“Protestations from banks that they had worked hard to make the changes in the contracts were unimpressive, Hoenig said. ‘The fact that it's in process isn't an accomplishment,’ Hoenig said in an interview. ‘You know, the crisis was 2008. This is 2014. You’ve got to be able to get into bankruptcy ... (it's) nice if people are working on it, but that doesn’t solve the problem.’”
http://reut.rs/1t0Mfig
Reuters’ Douwe Miedema and Emily Stephenson: “Banks need to urgently change a provision in derivatives contracts that prevents them from smoothly winding down their business if they start failing during a crisis, a top U.S. regulator told Reuters on Wednesday. Thomas Hoenig, second in command at the Federal Deposit Insurance Corp, said the so-called early termination rights were the most pressing problem regulators found last week with documents that show how banks can go through bankruptcy court during a crisis that threatens their solvency. The documents are known as ‘living wills’ and are seen as a critical step in avoiding future government bailouts.
“Protestations from banks that they had worked hard to make the changes in the contracts were unimpressive, Hoenig said. ‘The fact that it's in process isn't an accomplishment,’ Hoenig said in an interview. ‘You know, the crisis was 2008. This is 2014. You’ve got to be able to get into bankruptcy ... (it's) nice if people are working on it, but that doesn’t solve the problem.’”
http://reut.rs/1t0Mfig
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