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    US Agencies' Guidance on Treatment of Centrally Cleared Derivatives

    August 14, 2017

    The US Agencies (FED, OCC, and FDIC) issued supervisory guidance in response to questions from regulated institutions about the regulatory capital rules on regulatory capital treatment of certain centrally cleared derivative contracts, in light of some changes to the rulebooks of certain central counterparties. This guidance applies to state member banks, bank holding companies, and savings and loan holding companies (not substantially engaged in insurance underwriting or commercial activities) supervised by the FED, including those with USD 10 billion or less in consolidated assets.

    The variation margin for certain centrally cleared derivative contracts and netting sets of centrally cleared derivative contracts is considered a settlement payment for the exposure that arises from marking the cleared derivative contracts to fair value (settled-to-market contracts). If the variation margin on a centrally cleared derivative contract settles outstanding exposure on the contract and resets the fair value to zero, the supervised institution may consider the remaining maturity to be the time until the next exchange of variation margin.

     

    Related Links

     

    FED Letter: SR 17-7

    OCC Bulletin: 2017-27 

    FDIC Letter: FIL-33-2017 

    Effective Date: August 14, 2017

    Keywords: Americas, US, Banking, Clearing, Settled to Market, Variation Margin, US Agencies

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