Wall Street is about to extend the re-signing of financial agreements for trillions of dollars in an attempt to convince regulators that large banks may be liquidated without serious consequences for the economy, writes Bloomberg.
Trade and credit agreements under review, part of the lubricant, which takes care of the functioning of the global financial system. The changes are expected to allow certain contracts for securities and financing remain unchanged at most 48 hours after the bank collapsed, say three people familiar with the matter.
This extra time is aimed at giving time for governments to react and make attempts to rescue the doomed bank – something that is hard to do when contractors have destroyed the contracts and spit on his heels.
The aim is to prevent a repeat of the collapse of Lehman Brothers Holdings Inc. 2008, for which erupted a severe crisis in the credit markets.
Expected more banks to join JPMorgan Chase & Co., Goldman Sachs Group Inc. and 16 other vault, which last year agreed to waive their right to request immediate collateral contracts relating to derivative transactions from bankrupt competitor say more anonymous persons.
It is expected that the new changes relate to contracts for the financing of securities transactions, including repurchase agreements, and transactions with borrowed securities. Although such transactions are often quite a short time, some of them are in force long enough that putting them in pause may be important for regulators who are trying to deal with a failing bank.
Although the size of the repo market is below pre-crisis levels, it is still about 5 trillion. dollars. The market for securities lending does is estimated at nearly 2 trillion. dollars, according to the September data to United States Department of the Treasury.
Bank of England, the US Federal Reserve and the Federal Deposit Insurance Commission spent much of the past two years trying to convince banks to support the changes related contracts.
In the US regulators said the change is important for their forthcoming decision on whether the banks could be restructured in case of bankruptcy. US agencies also hinted that he would razpishat rules that impose postponement until European regulators already discussed possible new requirements.