-145-
automatic stay and permitted swap participants to net positions
in the setting of a bankruptcy. Congress passed the Federal
Deposit Insurance Corporation Improvement Act of 1991 (FDICIA),
Pub. L. 102-242, 105 Stat. 2286, 1 year later. Under 12 U.S.C.
sections 4401-4407 (2000), which were enacted as part of the
FDICIA, netting provisions are viewed by the CFTC as designed to
assure the enforceability of netting among specified financial
institutions and among members of clearing organizations for
CFTC-regulated exchanges. By enacting the FDICIA, and the
Financial Institutions Reform, Recovery, and Enforcement Act of
1989, Pub. L. 101-73, 103 Stat. 277, each applying to failed
depository institutions, Congress reduced systemic risk by
providing a high degree of legal certainty that netting
provisions would be upheld in insolvency proceedings in the
United States.
In the case of a foreign entity counterparty, netting was
not always enforceable. Of the 488 swaps at issue for 1993, 173
were with foreign counterparties. Of those 173, 119 were with
counterparties that hailed from countries which the G-30 report
concluded had enforceable netting arrangements.52 Of the
52 The G-30 report referenced legal memoranda prepared by
counsel familiar with the laws of nine countries discussing
issues of enforceability in Australia, Brazil, Canada, England,
France, Germany, Japan, Singapore, and the United States. In
each case, netting arrangements were considered by counsel to
almost certainly be enforceable in bankruptcy or insolvency
(continued...)
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