The largest lenders in the U.S., Europe and Japan on Saturday agreed to new procedures to help inoculate the global financial system against the failure of giant banks, the Wall Street Journal reported today. Top executives of 18 large U.S., European and Japanese banks, meeting at the Federal Reserve in Washington, agreed in principle to wait up to 48 hours before seeking to terminate derivatives contracts and collect associated payments from a troubled financial institution. The closed-door meeting included top banking executives, including Lloyd Blankfein of Goldman Sachs Group Inc., Antony Jenkins of Barclays PLC and Michael Corbat of Citigroup Inc. The delay will give regulators time to transfer a failing firm’s assets and some obligations into a new “bridge” company, removing the need to unwind derivatives contracts or undertake asset sales during times of turmoil. The changes, pushed for by global regulators and set to go into effect in January, are aimed at helping to end the problem of dealing with “too big to fail” banks that are so large and intertwined their collapse would threaten to trigger broad economic damage or market tumult. They are significant because they would force firms to give up certain rights they have under current contracts.
