• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Harvard Law School Bankruptcy Roundtable

Harvard Law School Bankruptcy Roundtable

  • Blog
  • About Us
  • Coverage-in-Depth
    • Crypto-Bankruptcy
    • Purdue Pharma Bankruptcy
    • Texas Two-Step and the Future of Mass Tort Bankruptcy
  • Subscribe
  • Show Search
Hide Search

House Judiciary Committee Approves Bill to Amend Chapter 11 for Financial Institution Bankruptcies

On February 11, 2016, the House of Representatives Judiciary Committee approved H.R. 2947—the Financial Institution Bankruptcy Act (FIBA)—which would amend the Bankruptcy Code to accommodate more smoothly the resolution of systemically important financial institutions (SIFIs). Introduced in July 2015, the current bill is essentially identical to an earlier version that passed the House in December 2014 (discussed in a Roundtable post here).

Like two pending Senate proposals, FIBA focuses on facilitating the recapitalization of a SIFI through a “single point of entry” (SPOE) approach similar to the strategy the FDIC has developed for implementing the Orderly Liquidation Authority (OLA) created in Title II of the Dodd-Frank Act. During an SPOE resolution, most of the failing SIFI’s assets would be transferred to a non-debtor bridge holding company to continue operations, leaving long-term debt and equity behind in the original holding company to be liquidated. (For a previous Roundtable post describing SPOE, click here.) Although both the House and the Senate bills would adapt the Bankruptcy Code to support recapitalization, FIBA differs from the Senate proposals in some important ways.

First, unlike the Senate proposals, FIBA does not repeal the OLA’s regulatory resolution process. FIBA would eliminate some of the major differences between the OLA and the current Bankruptcy Code to make bankruptcy a more viable route for failing SIFIs, but the OLA would remain an option for regulators.

Second, FIBA does not address either private or public financing for the bridge company. The Senate Judiciary Committee’s proposal, on the other hand, explicitly prohibits federal government funding. The bill pending in the Senate Banking, Housing, and Urban Affairs Committee also prohibits financing by Federal Reserve banks.

At the same time, FIBA and the Senate bills both impose a 48-hour stay on the exercise of contractual rights to terminate, liquidate, and offset qualified financial contracts to allow their transfer to a bridge company. At present, safe harbors in the Bankruptcy Code exempt such contracts from the automatic stay, and even the OLA imposes a stay of only one business day.

The full text of FIBA may be found here.

(This post was authored by Rebecca Green, J.D. ’17.)

Written by:
Editor
Published on:
February 16, 2016

Categories: Financial Firms and Safe HarborsTags: Dodd-Frank, FIBA, Orderly Liquidation Authority, Rebecca Green, Safe Harbors, SPOE, Title II

Primary Sidebar

Categories

Recent Posts

  • Do Rights Offerings Reduce Bargaining Complexity in Chapter 11? May 6, 2025
  • Rockville Centre Case Offers a Framework for Settling Mass Tort Bankruptcy Claims Post-Purdue April 29, 2025
  • False Venue Claims Signed Under Penalty of Perjury April 22, 2025

View by Subject Matter

363 sales Anthony Casey Bankruptcy Bankruptcy administration Bankruptcy Courts Bankruptcy Reform Chapter 11 Chapter 15 Claims Trading Cleary Gottlieb Comparative Law Corporate Governance COVID-19 cramdown David Skeel Derivatives DIP Financing Empirical FIBA Financial Crisis fraudulent transfer Jared A. Ellias Jevic Johnson & Johnson Jones Day Mark G. Douglas Mark Roe plan confirmation Priority Purdue Pharma Purdue Pharma bankruptcy restructuring Safe Harbors Schulte Roth & Zabel Sovereign Debt SPOE Stephen Lubben Structured Dismissals Supreme Court syndicated Texas Two-Step Trust Indenture Act Valuation Weil Gotshal Workouts

Footer

Harvard Law School Bankruptcy Roundtable

1563 Massachusetts Ave,
Cambridge, MA 02138
Accessibility | Digital Accessibility | Harvard Law School

Copyright © 2023 The President and Fellows of Harvard College

Copyright © 2025 · Navigation Pro on Genesis Framework · WordPress · Log in