Derivatives Safety and Soundness Supervision Act of 1995

TABLE OF CONTENTS:

Title I: Enhanced Supervision of Derivatives Activities

Title II: Supervisory Improvements

Title III: Financial Institution Insolvency Reforms

Title IV: International Regulatory Cooperation

Title V: GAO Study

Derivatives Safety and Soundness Supervision Act of 1995 - Title I: Enhanced Supervision of Derivatives Activities - Directs the appropriate Federal regulatory agencies to establish, in consultation with one another, substantially similar capital, accounting, disclosure, and suitability standards for their supervision of financial institutions engaged in derivatives activities. Requires the agencies to consider specified factors in establishing such standards, including: (1) capital requirements; (2) comprehensive risk management systems; (3) joint regulatory examinations; (4) prudent use of collateral by counterparties to derivatives transactions; (5) evaluation tools regarding a financial institution's exposure to derivatives activities; (6) protections against credit, legal, and systemic risks; and (7) supervision of senior management by the board of directors of a financial institution regarding the prudence of derivatives activities.

(Sec. 102) Amends the Federal Deposit Insurance Act (FDIA) and the Federal Credit Union Act to authorize Federal banking agencies to require that specified disclosures of derivatives activities be set forth in financial institution reports of condition ("call reports").

Authorizes each appropriate Federal regulatory agency to require non-insured financial institutions and credit unions to file derivative financial instruments' quarterly reports which contain information comparable to that of their insured counterparts.

(Sec. 103) Directs the Financial Institutions Examination Council (the Council) to sponsor training programs concerning derivatives activities for examiners employed by any agency represented on the Council.

Mandates that the Council's risk management training include techniques related to derivatives activities.

(Sec. 104) Directs the appropriate Federal regulatory agencies to establish liaison committees with their State counterparts.

Title II: Supervisory Improvements - Prohibits a financial institution from: (1) engaging in derivatives activities without a specified written management plan approved by its board of directors; or (2) acting as a dealer in derivative financial instruments or as an active end-user unless its board of directors is familiar with specified attendant risks. Authorizes the appropriate Federal regulatory agency to treat noncompliance with this Act as an unsafe or unsound practice.

(Sec. 202) Mandates that the appropriate Federal regulatory agency develop the means to obtain all necessary information regarding derivatives activities or instruments whenever it determines an emergency situation exists.

(Sec. 203) Amends the FDIA to require each appropriate Federal banking agency to prescribe safety and soundness standards for insured depository institutions and depository institution holding companies relating to internal control for activities involving derivative financial instruments.

(Sec. 204) Amends the International Banking Act of 1978 to include as a prerequisite for Federal approval of an application to establish a foreign bank office in the United States the comprehensive supervision and regulation of derivatives activities by the applicant's home country.

Title III: Financial Institution Insolvency Reforms - Amends the FDIA regarding the prohibition against the avoiding of transfers of money or property by conservators or receivers of insured depository institutions in connection with certain swap agreements to include within the definition of such agreements: (1) equity derivatives; (2) equity or equity index swaps or options; (3) bond options; and (4) spot foreign exchange transactions.

(Sec. 302) Prohibits any construction of Federal law that would place legal or judicial constraints upon the power of the Federal Deposit Insurance Corporation (FDIC) to transfer or liquidate a qualified financial contract. Requires the FDIC to prescribe regulations requiring more detailed recordkeeping by undercapitalized insured depository institutions for qualified financial contracts.

(Sec. 303) Modifies the guidelines governing transfers of qualified financial contracts with respect to: (1) certain netting rights; (2) notification; (3) the treatment of bridge banks; and (4) certain conservatorships.

(Sec. 304) Declares that a master agreement for any contract, together with all supplements, shall be treated as a single agreement and a single qualified financial contract.

Title IV: International Regulatory Cooperation - Instructs the Secretary of the Treasury to request a meeting with representatives of major industrialized countries to plan a study of the adequacy of the international regulation and supervision of derivatives activities of financial institutions. Prescribes study goals and issues.

(Sec. 402) Directs the Chairman of the Board of Governors of the Federal Reserve System and the Comptroller of the Currency to encourage central banks and regulatory authorities of other industrialized countries to adopt comparable supervisory and capital standards and regulations for financial institutions engaged in derivatives activities.

Title V: GAO Study - Directs the Comptroller General to study and report to the Congress on speculative transactions by financial institutions involving derivative financial instruments and the feasibility of imposing margin and collateral requirements upon them.