Study on the Resolution of Financial Companies under the Bankruptcy Code

Study on the Resolution of Financial Companies under the Bankruptcy Code, July 2011

  • “Under section 216 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), the Board of Governors of the Federal Reserve System (the Board), in consultation with the Administrative Office of the United States Courts (the Administrative Office), must conduct a study regarding the resolution of financial companies under Chapter 7 or Chapter 11 of the Bankruptcy Code. Section 216 directs the Board specifically to study five topics, including (1) the effectiveness of the Bankruptcy Code for systemic financial companies, (2) the establishment of a special court or panel of judges for financial company bankruptcies, (3) the adoption of amendments to the Bankruptcy Code to enhance its ability to resolve financial companies, (4) the treatment of qualified financial contracts (QFCs) in U.S. insolvency laws, and (5) the establishment of a new chapter or subchapter of the Bankruptcy Code for financial companies. The five topics specified in section 216 generally correspond to specific proposals for amending the Bankruptcy Code that were presented to the Congress in connection with its consideration of the Dodd-Frank Act, specifically in connection with its consideration of the “orderly liquidation authority” (OLA) in Title II of the Dodd-Frank Act.”
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