Comment Letter to Department of Treasury on Issues Regarding the Treatment of OTC Derivatives in Bankruptcy and Under a Resolution Authority Framework

MFA submitted a letter to Treasury Deputy Secretary Neal Wolin, which set out several issues related to the treatment of OTC derivatives contracts in the context of bankruptcy and resolution authority. Specifically, the letter set out concerns regarding the segregation of collateral and portability of OTC contracts in the event that a clearing member of a central counterparty provider goes into bankruptcy. The letter summarized the analysis and proposed legislative amendments with respect to the U.S. central clearing proposals that are contained in a report prepared last year by Cleary Gottlieb Steen & Hamilton. The letter also set out differences in the treatment of derivatives contracts under the Bankruptcy Code and the Resolution Authority title passed by the House of Representatives, respectively.