Division 4B — Termination rights
Interpretation of this Division
82.  In this Division, unless the context otherwise requires —
“approved clearing house” has the meaning given by section 2(1) of the Securities and Futures Act 2001;
“basic substantive obligation”, in relation to a contract, means an obligation provided by the contract for payment, delivery or the provision of collateral;
“business day” has the meaning given by section 2(1) of the Banking Act 1970;
“designated payment system” has the meaning given by section 2(1) of the Payment Services Act 2019;
“foreign resolution” means any action by a foreign resolution authority of a foreign country or territory to do either or both of the following:
(a)to maintain financial stability;
(b)to deal with any serious problem in a financial institution of that country or territory which affects the ability of the financial institution to continue its business or operations as a financial institution, and which, if not dealt with, may cause the financial institution to be no longer able to continue its business or operations as a financial institution;
“foreign resolution authority”, in relation to a foreign country or territory, means an authority of the foreign country or territory which, whether alone or together with one or more other authorities of the foreign country or territory, is responsible for a foreign resolution, or for preparing plans for a foreign resolution;
“group of companies”, in relation to a pertinent financial institution, means —
(a)the pertinent financial institution;
(b)the entities that are subsidiaries of the pertinent financial institution; and
(c)the entity that is the holding company of the pertinent financial institution, and the entities that are subsidiaries of that holding company;
“operator” and “settlement institution” have the respective meanings given by section 2(1) of the Payment Services Act 2019;
“reinsurance contract” means any contract or arrangement involving the reinsurance of liabilities under insurance policies;
“resolution measure” means —
(a)the making of a determination under Division 2, 3, 4, 4A or 5A, the issue of any certificate under Division 2, 3, 4 or 4A, the making of an order under Division 5A, or the exercise of any power under any such certificate or order; or
(b)the exercise of any power under any relevant provision applicable to the pertinent financial institution concerned;
“termination right” means —
(a)a right to terminate a contract;
(b)a right to accelerate, close out, set off or net an obligation under a contract that would result in a suspension or modification or the extinguishment of the obligation;
(c)a right to suspend, modify or extinguish an obligation of a party to a contract; or
(d)in the case of a reinsurance contract, a right of the reinsurer to terminate or not to reinstate coverage under the contract.
[31/2017; 2/2019]
Effect of resolution measure on contracts where substantive obligations continue to be performed
83.—(1)  This section applies to a contract that satisfies both of the following:
(a)one of the parties to the contract is —
(i)a pertinent financial institution that is the subject of a resolution measure; or
(ii)an entity that is part of the same group of companies as that of a pertinent financial institution where —
(A)the pertinent financial institution is the subject of a resolution measure; and
(B)the obligations of the entity under the contract are guaranteed or otherwise supported by the pertinent financial institution;
(b)the substantive obligations of the contract (including all applicable basic substantive obligations) continue to be performed by the parties to the contract.
[31/2017]
(2)  Despite any rule of law, written law or contract —
(a)the resolution measure, and the occurrence of any event directly linked to it, are to be disregarded in determining the applicability of a provision in the contract enabling a party to exercise a termination right; and
(b)any purported exercise of that termination right in reliance on that provision in the contract on the basis of either of those grounds in paragraph (a) has no effect.
[31/2017]
(3)  For the purposes of subsection (1)(b), a basic substantive obligation of a pertinent financial institution (being an approved clearing house or an operator or a settlement institution of a designated payment system) under a contract is not considered to be no longer performed, by reason only that the institution allocates any loss to its participants, or uses collateral provided by or on behalf of its participants —
(a)under its margin rules or default arrangements; or
(b)pursuant to a resolution measure.
[31/2017]
Right to temporarily suspend termination right for contracts because of resolution measure
84.—(1)  This section applies to a contract one of the parties to which is —
(a)a pertinent financial institution that is the subject or proposed subject of a resolution measure;
(b)a pertinent financial institution in respect of which a foreign resolution authority of a foreign country or territory has carried out, or has informed the Authority that it has grounds to carry out, a foreign resolution; or
(c)an entity that is part of the same group of companies as that of a pertinent financial institution where —
(i)the pertinent financial institution is the subject or proposed subject of a resolution measure;
(ii)the contract has a termination right that is exercisable if the pertinent financial institution becomes insolvent or is in a certain financial condition; and
(iii)the obligations of the entity under the contract are guaranteed or otherwise supported by the pertinent financial institution.
[31/2017]
(2)  The Authority may, by written notice to the parties to the contract, suspend the exercise of any termination right in the contract for a specified period.
[31/2017]
(3)  The notice under subsection (2) does not apply to —
(a)a termination right under the contract which becomes exercisable for a breach of a basic substantive obligation only;
(b)a termination right under a contract between the pertinent financial institution and a person prescribed for the purposes of this paragraph by regulations made under section 126; or
(c)a termination right under a contract, or a contract within a class of contracts, prescribed for the purposes of this paragraph by regulations made under section 126.
[31/2017]
(4)  When exercising a power under subsection (2), the Authority must have regard to its impact on the safe and orderly functioning of the financial market and financial market infrastructures operating in Singapore.
[31/2017]
(5)  The notice under subsection (2) —
(a)may relate to all or any class or description of parties to a contract;
(b)may make different provisions for different classes or descriptions of parties to a contract; and
(c)may be of general or specific application.
[31/2017]
(6)  A copy of the notice under subsection (2) must be published —
(a)by the Authority in the Gazette and on its website; and
(b)by the pertinent financial institution on its website.
[31/2017]
(7)  In this section, a pertinent financial institution is a proposed subject of a resolution measure if the Authority is satisfied that there is a basis for that action under section 50 in relation to that pertinent financial institution.
[31/2017]
When suspension takes effect
85.—(1)  A suspension by a notice under section 84 takes effect from (and including) the time of publication of the notice under that section in the Gazette or a time on another date specified in the notice, and —
(a)if the contract is not a reinsurance contract, expires no later than the same time on the second business day after —
(i)the date of publication of the notice; or
(ii)the other date specified in the notice,
as the case may be; or
(b)if the contract is a reinsurance contract, expires no later than the time and date prescribed for the purposes of this paragraph by regulations made under section 126.
[31/2017]
(2)  During the period of suspension of a termination right under a contract and despite any provision of any rule of law, written law or contract, any purported exercise of that right has no effect.
[31/2017]
(3)  A person whose termination right under a contract is suspended under section 84 may (in accordance with the terms of the contract) exercise that right before the expiry of the suspension if the Authority gives the person written notice that the person may exercise that right because —
(a)the contract does not or will not form part of the business of the pertinent financial institution to be transferred under section 58; or
(b)the Authority has decided not to make a determination under Division 4A in relation to the pertinent financial institution.
[31/2017]
(4)  On the expiry of the period of suspension under section 84 of a termination right under a contract, the person who holds that right may (if it had not already been exercised under subsection (3)) exercise that right in accordance with the terms of the contract, but not on any of the following grounds:
(a)a resolution measure taken in relation to the pertinent financial institution;
(b)the occurrence of an event directly linked to such resolution measure;
(c)if the contract forms part of any business of the pertinent financial institution that has been transferred to another person pursuant to a certificate of transfer under section 58 or an onward transfer certificate under section 64, any act of the pertinent financial institution before the transfer;
(d)the suspension itself.
[31/2017]