QFC stands for Quality Food Centers, which is an American supermarket chain in western Washington and northwestern Oregon. It is owned by Kroger. QFC stores are known for having a wide range of offerings, from $1 Chobani yogurts to high-end wines and upscale produce. QFC also has a reputation for having well-trained and helpful staff.
QFC has 62 stores in a predominantly suburban and residential area, with most locations located east of Seattle, along the I-5 corridor. The chain is most prominent in the Bellevue and Wedgwood neighborhoods.
In October 2017, US banking regulators enacted the “Resolution Stay Rules” (also called the “QFC Resolution Stay Rules”), which require global systemically important banks (“GSIBs”) to amend a broad variety of financial contracts with their counterparties. This amendment requirement covers a broad spectrum of transactions, from spot and forward physical commodity contracts to off-shore securities underwritings by GSIB affiliates.
The resolution stay rules require GSIBs to bring into compliance all of their in-scope qualified financial contracts (QFCs) by Jan. 1, 2019. For legacy agreements, this requires that a GSIB and its consolidated affiliates comply with a number of new requirements, including (i) the imposition of mandatory arbitration provisions; (ii) the imposition of limitations on default rights, transfer restrictions and credit enhancement transfers; and (iii) the imposition of netting and setoff rights.
GSIBs may remediate their QFCs by either: (i) entering into bilateral amendments on a contract-by-contract basis with each of their counterparties; or (ii) adhering to an industry “protocol” published by ISDA and/or other industry groups, which is specifically permitted under the resolution stay rules’ safe harbor provisions. ISDA has prepared standard bilateral amendments, and other industry groups are working on standardized language. The ISDA Protocol, however, provides greater creditor protections than the Resolution Stay Rules’ requirements alone.
For this reason, some market participants have decided that they prefer the flexibility of complying with the QFC rules through bilateral amendments rather than by adhering to a specific ISDA-style protocol. As a result, we expect to see some GSIBs and their non-ISDA counterparties use the bilateral amendment approach for their in-scope QFCs. As a result, market participants should carefully consider the benefits and drawbacks of both approaches. QFC