# Too Big to Fail   Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2020-03-04 Category: BUSINESS Category URL: https://financedigest.com/category/business Meta Title: Are Global Systemically Important Banks (GSIB) Compliant with US Stay Rules? Meta Description: Are GSIBs confident in identifying all in-scope QFCs post-January 1st deadline? Challenges with data inconsistencies and potential consequences of URL: https://financedigest.com/too-big-to-failhtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/fd120918-1-1736838943994-compressed.jpg) By **Peter Newton**, Managing Director, Paul Chymiy, Co-Head of US operations and Darren Fortunato, D2 Legal Technology. _The January 1st 2020 deadline for the US Stay Rules has passed – so are Global Systemically Important Banks (GSIB) now fully compliant? Have all their covered entities, subsidiaries, affiliates, and their client counterparties that use derivatives, repurchase Peter Newton, Managing Director, Paul Chymiy, Co-Head of US operations and Darren Fortunato, agreements and certain other types of financial contracts been identified, and in-scope qualified financial contracts (QFC) remediated? Or will the lack of accurate, up to date trading partner information jeopardise and undermine the recovery and resolution objectives of avoiding another “too big to fail” scenario?_ **Trading Confidence** As the dust settles on the US QFC Stay Rules, how confident are GSIBs (whose ranks are determined by the Basel Committee on Banking Supervision (BCBS) [methodology framework](https://www.bis.org/fsi/fsisummaries/g-sib_framework.htm)) that all necessary contracts have been captured? Having spent many months trawling through multiple, inconsistent [data sources](https://www.financedigest.com/exclusive-tiktok-nears-deal-with-oracle-to-store-its-data-sources.html "Exclusive-TikTok nears deal with Oracle to store its data-sources") in a bid to identify in-scope QFCs, the lack of robust, accurate and consistent client trading data has become painfully apparent. The initial tranche of ‘GSIB to GSIB’ QFCs were relatively straightforward to identify, as were the GSIB to financial [institution](https://www.financedigest.com/top-5-security-technologies-that-every-finance-institution-workplace-should-consider.html "Top 5 Security Technologies That Every Finance Institution Workplace Should Consider") agreements. However, with every line of business [recording client trading](https://www.financedigest.com/euro-zone-posts-record-trade-deficit-in-august-amid-soaring-energy-prices.html "Euro zone posts record trade deficit in August amid soaring energy prices") contracts separately, cataloguing this final round of QFCs, between GSIBs and the remaining trading partners, has presented significant challenges. From identifying relevant [customers to prioritising the key](https://www.financedigest.com/why-transforming-the-back-office-is-key-to-customer-experience-success-in-financial-services.html "Why Transforming the Back-Office is Key to Customer Experience Success in Financial Services") trading partners and interpreting the definition of in-scope QFCs, before even embarking upon the contract remediation process, the lack of consistent information between GSIBs and the remaining trading partners has underlined the extent of the risk. **Unintended Consequences** Despite the doom-mongers, all hell did not break loose on 1st January 2020: Organisations achieved compliance with their most [important customers](https://www.financedigest.com/why-due-diligence-is-so-important-for-direct-debit-customers.html "Why due diligence is so important for Direct Debit customers"), at least, and are therefore still able to trade. But edginess remains. Have all trading counterparties been identified? Have some been merged, been acquired, even dissolved? If so, what about all the affiliates of every counterparty? Miss one affiliate, fail to identify and remediate any in-scope QFC, and any trade with that group will result in a reportable violation of the US [Stay Rules](https://www.financedigest.com/german-regulator-stays-vigilant-as-meta-changes-vr-headset-rules.html "German regulator stays vigilant as Meta changes VR headset rules"). Are we about to see [fines and other regulatory sanctions rack](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than billion in fines for WhatsApp use") up in this regard? Without information one can trust and rely on, without a database covering not only all US GSIBs and their worldwide subsidiaries but also the US branches, agencies and subsidiaries of non-US GSIBs “covered entities”, across the [entire business](https://www.financedigest.com/asset-management-it-solution-market-asset-management-grow-crucial-for-various-organizations-to-evaluate-entire-business.html "Asset Management IT Solution Market – Asset Management Grow Crucial for Various Organizations to Evaluate Entire Business"), can any firm be sufficiently confident that every trading partner has been identified? Some of these organisations are very infrequent trading partners; records may be five, ten, even 20 [years old](https://www.financedigest.com/u-s-fda-backs-pfizers-covid-19-booster-shot-for-12-to-15-year-olds.html "U.S. FDA backs Pfizer’s COVID-19 booster shot for 12- to 15-year-olds"). [Names have changed](https://www.financedigest.com/quidditch-becomes-quadball-as-sports-bodies-change-name.html "Quidditch becomes quadball as sport’s bodies change name"), contacts have moved, mergers – even multiple mergers – have occurred. With stale data it is incredibly difficult to identify in scope entities and, should a company’s status have changed – through merger or dissolution, for example – it is then [time consuming](https://www.financedigest.com/adapting-payments-to-reassure-consumers-and-safeguard-profitability-during-times-of-uncertainty.html "Adapting payments to reassure consumers and safeguard profitability during times of uncertainty") to obtain the required evidence and documentation from the relevant authorities and bodies across various jurisdictions. With haphazard recording of trading data across departments, firms are at [risk of falling](https://www.financedigest.com/euro-zone-bond-yields-fall-as-ecb-policymaker-flags-recession-risk-gilts-eyed.html "Euro zone bond yields fall as ECB policymaker flags recession risk, gilts eyed") foul of the law of unintended consequences. 97.5% of agreements may have been repapered but, get it wrong, miss a partner, or affiliate, overlook an in-scope QFC and the results could be fatal – a problem with one legacy trading [partner could contaminate other parts of the portfolio](https://www.financedigest.com/passendo-partners-with-leading-media-company-audienzz-to-revolutionise-its-ad-offer-in-a-portfolio-of-over-70-premium-newsletters.html "Passendo partners with leading media company, audienzz, to revolutionise its ad offer in a portfolio of over 70 premium newsletters"). **Client** [Relationship Management](https://www.financedigest.com/money-management-for-couples-navigating-finances-in-a-relationship.html "Money Management for Couples: Navigating Finances in a Relationship") There is no doubt that since the introduction of Know Your Customer (KYC) and [Anti-Money Laundering](https://www.financedigest.com/are-compliance-and-anti-money-laundering-aml-regulations-hurting-your-sales.html "Are compliance and anti-money laundering (AML) regulations hurting your sales?") (AML) requirements, firms have become far more robust about client onboarding data and processes. But what happens next? Where is the single source of information regarding the ongoing client relationship? Having taken over a decade from the regulatory imperative to end “too big to fail” to address global stay resolution requirements, it is absolutely essential that [banks build on this data resource and create a foundation for future](https://www.financedigest.com/key-considerations-for-building-an-inclusive-digital-banking-experience-fit-for-the-future.html "Key considerations for building an inclusive Digital Banking Experience fit for the Future"). By focusing on extending the client onboarding experience an enhanced end to end Client Relationship Management lifecycle can be achieved, enabling firms to capture every trading agreement, every affiliate and subsidiary, every [business change](https://www.financedigest.com/lane-change-assist-systems-market-overview-business-growth-development-factors-application-and-future-prospects.html "Lane Change Assist Systems Market Overview – Business Growth, Development Factors, Application And Future Prospects") and every new contact and provide that data in a consistent form to each relevant department and team. With a consistent, end to end customer relationship management model, firms can achieve a single, [central source of trusted](https://www.financedigest.com/u-s-to-move-3-5-billion-in-afghan-central-bank-assets-to-swiss-based-trust.html "U.S. to move .5 billion in Afghan central bank assets to Swiss-based trust"), accurate and up to date client data that should underpin not just compliance to global regulations aimed at ending “too big to fail” but also optimise day to day operations and enhance the client onboarding experience. --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---