Summary: H.R.5585 — 109th Congress (2005-2006)All Information (Except Text)

Bill summaries are authored by CRS.

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Public Law No: 109-390 (12/12/2006)

(This measure has not been amended since it was passed by the Senate on September 30, 2006. The summary of that version is repeated here.)

Financial Netting Improvements Act of 2006 - (Sec. 2) Amends the Federal Deposit Insurance Act (FDIA) and the Federal Credit Union Act to revise treatment of certain agreements entered into before appointment of depository institution conservators or receivers, including securities contracts, forward contracts, and swap agreements.

(Sec. 3) Defines "person" to include any governmental entity.

(Sec. 4) Amends the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) to revise certain requirements pertinent to bilateral netting to declare that the covered contractual payment obligations and the covered contractual payment entitlements between any two financial institutions shall be terminated, liquidated, accelerated, and netted in accordance with, and subject to the conditions of, the terms of any applicable netting contract.

Declares, with respect to clearing organization netting, that the covered contractual payment obligations and the covered contractual payment entitlements of a member of a clearing organization to and from all other organization members shall be terminated, liquidated, accelerated, and netted in accordance with and subject to the conditions of any applicable netting contract.

(Sec. 5) Makes conforming amendments to the FDICIA, federal bankruptcy law, and the Securities Investor Protection Act of 1970.

Amends the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 to state that the meanings of terms used in the Act are applicable for its purposes only, and shall not be construed or applied so as to challenge or affect the characterization, definition, or treatment of any similar terms under any other statute, regulation, or rule, including the Gramm-Leach-Bliley Act, the Legal Certainty for Bank Products Act of 2000, the securities laws, and the Commodity Exchange Act.

(Sec. 6) Amends the Federal Deposit Insurance Act and the Federal Credit Union Act to repeal the non-enforceability of a walkaway clause (thus making it enforceable) in a qualified financial contract of an insured depository institution in default.

States that any payment or delivery obligation otherwise due from a party pursuant to a qualified financial contract is suspended from the time a receiver is appointed until the earlier of: (1) the time a party receives notice that the contract has been transferred; or (2) 5 p.m. (eastern time) on the business day after the receiver's appointment.