Banks Rewrite Contracts Worth Trillions to Shed Too-Big-to-Fail
- Lenders agree to halts before financing deals can be canceled
- Pauses would give regulators time to wind down failing banks
Do U.S. Banks Still Pose Systemic Risks?
Wall Street is poised to expand a rewrite of financial contracts worth trillions of dollars in an effort to persuade regulators that giant banks can be wound down without hurting the broader economy.
The trading and lending agreements being reworked are part of the grease that makes the global financial system function. The changes are expected to allow certain securities and funding contracts to remain intact for as long as 48 hours after a bank fails, said three people with knowledge of the matter. The extra time is intended to give a faltering bank’s home government time to jump in and set up a healthy version of the doomed institution, something that’s difficult to do when counterparties have terminated contracts and fled.