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Sept. 29 (Bloomberg) -- About 14 global banks will adopt new derivatives contracts by the end of October aimed at halting cascades of defaults in the financial system during a crisis, the Financial Stability Board said.

The International Swaps and Derivatives Association Inc., an industry group, is preparing amendments to its standard framework of documents that would allow regulators from any jurisdiction to temporarily halt claims on defaulting banks, the FSB said in a statement on its website. It didn’t identify the banks that had signed up for the new contracts.

“Effective stays on termination rights that arise only by reason of or in connection with a firm’s entry into resolution are important to prevent the close out of financial contracts in significant volumes,” the FSB said.

A global agreement on stays in derivatives contracts is one of several policies the FSB, a grouping of regulators and central bankers from around the world, is trying to finish before the Group of 20 nations meet in Brisbane in November. It forms part of a package of measures aimed at ending implicit government support to large financial firms, which includes requiring banks to hold an additional loss-absorbing buffer that can be quickly written down in a crisis.

The FSB, whose chairman is Bank of England Governor Mark Carney, said that it couldn’t force asset managers, investment firms and non-financial companies to sign up to the new derivatives contracts and warned that would limit their effectiveness..

“Any contractual solution binds only the parties that agree to it,” the FSB said in the statement. “In order to be effective, such contractual provisions would have to be adopted by both sides of the trade.”

To contact the reporter on this story: Ben Moshinsky in London at bmoshinsky@bloomberg.net To contact the editors responsible for this story: Anthony Aarons at aaarons@bloomberg.net Keith Campbell, Jon Menon

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