On October 30, 2015, the Farm Credit Administration, the FDIC, the Federal Housing Finance Agency, the Federal Reserve Board and the Office of the Comptroller of the Currency jointly issued a final rule establishing margin requirements for uncleared swaps. The FDIC and OCC had previously approved the final rule on October 22, 2015. The rule will apply to swap dealers, security-based swap dealers, major swap participants and major security-based swap participants supervised by the aforementioned agencies and registered with the US Commodity Futures Trading Commission or the Securities and Exchange Commission. Sections 731 and 764 of the Dodd-Frank Act require the agencies to establish capital and margin requirements for registered swap dealers, major swap participants, securitybased swap dealers and major security-based swap participants in order to address the risks to such entities and the financial system from non-cleared derivatives. Specifically, the final rule requires that initial and variation margin be exchanged between covered swap entities and certain counterparties in connection with non-cleared swaps and securitybased swaps. The rule also specifies how margin is to be calculated, what types of margin are eligible and how margin is to be held. Additionally, the agencies approved an interim final companion rule to the joint final rule establishing swap margin requirements. As required under a 2015 statute, the interim final rule exempts from the new margin requirements certain non-cleared swaps and non-cleared security-based swaps with certain counterparties that qualify for an exemption from clearing under the Dodd-Frank Act (including certain commercial end-users engaged in hedging activity). The final rule contains certain other exceptions, including for financial institutions with $10 billion or less in total assets that specifically use swaps for hedging. Both the final rule and interim final rule will be effective April 1, 2016. The final rule will be phased in from September 1, 2016 to September 1, 2020.
The final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151030b1.pdf.
The interim final rule is available at: http://www.federalreserve.gov/newsevents/press/bcreg/bcreg20151030b2.pdf.
The OCC press release is available: http://www.occ.treas.gov/news-issuances/news-releases/2015/nr-occ-2015-142.html.
The statement by FDIC Chairman Martin J. Gruenberg is available at: https://www.fdic.gov/news/news/speeches/spoct2215a.html.
The statement by FDIC Vice Chairman Thomas M. Hoenig is available at: https://www.fdic.gov/news/news/speeches/spoct2215.html.