Alert April 26, 2011

FRB Requests Comments Regarding its Studies Mandated by the Dodd Frank Act Concerning the Resolution of Financial Companies Under the Bankruptcy Code

The FRB issued a notice and request for information (the “ Notice”) regarding two studies that the FRB is required to conduct pursuant to Sections 216 and 217 of the Dodd-Frank Act (the “Act”) regarding the resolution of financial companies under the Bankruptcy Code.  Under Section 216 of the Act, the FRB, in consultation with the Administrative Office of the United States Courts (“AOUSC”) must conduct a study (the “Section 216 Study”) concerning the resolution of financial companies under Chapter 7 and Chapter 11 of the Bankruptcy Code.  Under Section 217 of the Act, the FRB, in consultation with the AOUSC, must conduct a second study (the “Section 217 Study”) concerning international coordination relating to the resolution of systemic financial companies under the Bankruptcy Code and applicable foreign law.

In the Notice, the FRB solicits public comment with respect to the Section 216 Study regarding: (1) the effectiveness of Chapter 7 and Chapter 11 of the Bankruptcy Code in facilitating the orderly resolution or reorganization of systemic financial companies; (2) whether a special court or panel of special masters or judges should be established to oversee cases involving the bankruptcy of financial companies; (3) whether amendments to the Bankruptcy Code should be enacted regarding the resolution of financial companies; (4) whether amendments to the Bankruptcy Code, the Federal Deposit Insurance Act and other insolvency laws should be adopted regarding the manner in which qualified financial contracts of financial companies are treated; and (5) the pros and cons of creating a new chapter or subchapter of the Bankruptcy Code to deal with financial companies.

The FRB seeks public comment with respect to the Section 217 Study regarding: (1) the current level of international coordination; (2) current mechanisms and structures for facilitating international cooperation; (3) barriers to effective international coordination; and (4) ways to improve international coordination of resolution of financial companies to minimize the impact on the financial system while not creating moral hazard.

Comments are due no later than 30 days after the Notice’s publication in the Federal Register.