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Part III Europe, 14 Derivatives in Cross-Border Insolvency Proceedings

Francisco Garcimartín

From: Bank Failure: Lessons from Lehman Brothers

Edited By: Dennis Faber, Niels Vermunt

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved.date: 01 February 2023

Banks and cross-border issues — Bank resolution and insolvency — Regulation of banks — Credit — Derivatives

This chapter defines derivatives as a starting point and looks at how they work. Traditionally, they have enjoyed privileged status in an insolvency scenario, both at the substantive-law level and at the conflict-of-laws level. The chapter describes how the new resolution framework has reduced that privileged status and ‘re-routed’ those financial agreements to general principles of insolvency law, in particular as regards the ‘ipso facto clause’ and other termination rights, and explains its reasons. This raises the question of whether that privileged status must be kept and the resolution scenario must be qualified as an exception to it, or conversely whether this is just a first step to reconsidering the whole approach.

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