Fed extends reach of netting rule

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The Federal Reserve announced on February 18 that it was significantly extending access to enforceable netting contracts to more financial institutions, including foreign central banks.

Netting contracts are where parties to a transaction agree that they will pay or receive the net payment due, rather than the gross. Each party’s obligation is altered given other debits and credits owed between the two contracting parties.

Before the Fed’s change, the relevant regulation covered “bilateral

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