FDIC’s final QFC recordkeeping rule

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On July 18th, the Federal Deposit Insurance Corporation (FDIC) Board of Directors finalized the Qualified Financial Contract (QFC) recordkeeping rule (FDIC rule) to become effective on October 1, 2017. The FDIC rule amends the Federal Deposit Insurance Act and requires Insured Depository Institutions (IDIs) in “troubled condition” upon notice from the FDIC to maintain and produce an expanded set of records and documentation of their QFCs (i.e., aggregated QFC position, counterparty, collateral, and legal documentation). The FDIC rule is intended to provide the FDIC with broader visibility of troubled IDIs’ QFCs, so that in the event that an IDI were to go into receivership, the FDIC would be positioned to quickly make decisions as to which QFCs would be moved to a bridge bank and which contracts would be addressed in resolution. 

The FDIC rule significantly increases the QFC recordkeeping requirements for impacted IDIs, which closely align with those of the Treasury Department’s QFC recordkeeping rule for banking groups and certain non-bank affiliates finalized last year (Treasury rule). While the FDIC’s original proposal conformed the information requirements to those of the Treasury rule for full scope entities and moderated them for all other IDIs, it also presented a number of differences in terms of legal entity scope, timing of application, and the absence of an exemption mechanism. Although the final FDIC Rule addressed a number of these industry concerns it still poses substantial compliance challenges for IDIs.

  1. Hope for the best, prepare for the worst. 
  2. Timing Matters.  
  3. Ask one question, you may get two different answers. 
  4. The FDIC knows a QFC when it sees it. 
  5. Know your counterparty’s family. 

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Julien Courbe

Financial Services Leader, PwC US

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