A total of 18 major global banks (G-18) have offered their consent to sign a new ISDA Resolution Stay Protocol in order to facilitate cross-border resolution efforts and minimize systemic risk.
Developed in coordination with the Financial Stability Board (FSB), the protocol will be implemented in early November and will be effective from January 1, 2015.
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The protocol will govern new as well as existing trades between adhering parties.
The protocol will offer time to regulators to enable orderly resolution of a troubled bank by imposing a stay on cross-default and early termination rights within standard ISDA derivatives contracts between G-18 firms if any one of them is subject to resolution action in its jurisdiction.
The G-18 banks will extend the coverage of stays to over 90% of their outstanding derivatives notional by complying by the protocol, and the proportion will eventually rise when other firms sign the Protocol.
At the same time, the protocol will help adhering counterparties to opt into certain overseas resolution regimes through a change to their derivatives contracts.
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