Financial Regulation International
The ISDA 2015 Universal Resolution Stay Protocol: Novelties of the Stay Recognition for financial contracts
Financial contracts such as derivatives, repurchase agreements and securities lending transactions serve vital functions for
financial institutions as they facilitate risk management and provide liquidity. The agreements may provide for rights to
liquidate, terminate, cancel, rescind or accelerate the relevant agreement or transaction (‘default rights’) of the contract
if the counterparty is in the vicinity of insolvency or insolvency proceedings are commenced against it, thereby inter alia
mitigating the expected loss from the default. The termination can however have disastrous consequences, for example due to
the loss of aforementioned functions for the distressed financial institution. The Financial Stability Board[1] (‘FSB’)’s
paper published on 3 November 2015 stipulates that: