U.S. Regulators Require Banks And Bank Affiliates To Amend Contracts With Utilities.

New rules adopted by federal banking regulators will affect many electric power, natural gas, and other contracts between banks or their affiliates and their utility counterparties, including public power, cooperative, and investor-owned utilities. While the regulations are complex and cover a variety of arrangements and scenarios, this Alert highlights those regulations that are likely relevant to most U.S. utilities.

Key regulations affecting bank-counterparty contracts include:

Utility contracts affected include:

Contract amendment deadlines and obligations include:

Because it is possible that affected banks and their affiliates may inadvertently overlook some contracts or fail to persuade some counterparties to amend their QFCs, regulators have set up other provisions.

To amend contracts, regulators have set forth two methods: (1) Send $500 and a letter to ISDA acknowledging adherence to the ISDA Stay Protocol, which is capable of amending any type of QFC (whether it was an ISDA document or not), or (2) Bilaterally amend the actual QFC. The first method is easiest and may offer other advantages over amending bilaterally.

McCarter & English, LLP

November 28, 2018



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