Big plans for derivatives termination stays – the BoE view
Regulators plan to suspend termination rights for the buy side, and extend stays to repo and securities-lending trades – as has already happened for bilateral swaps between big dealers. Some buy-side firms are protesting, but the Bank of England’s Andrew Gracie argues changes to termination rights need to be put in context
Last year saw a heated debate over attempts to prevent over-the-counter derivatives terminations interfering with the developing mechanics of bank resolution. At issue was the design of a contractual amendment, signed voluntarily by 18 dealers in November, which would be triggered when a bank entered resolution proceedings and temporarily stay the right of surviving counterparties to immediately settle their trades. The same kind of stay will be extended to other market participants this year
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