US Agencies (Farm Credit Administration, FDIC, FED, FHFA, and OCC) re-opened comment period for the proposal to amend regulations that require swap dealers and security-based swap dealers under the agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margin Rule). The proposal was initially published on November 07, 2019 and the end of comment period for this consultation has been extended from December 09, 2019 to January 23, 2020.
The agencies received public comments requesting an extension of the comment period, noting that the respondents did not have sufficient time to fully analyze the agencies’ proposals during the original thirty-day comment period. Therefore, the agencies are re-opening the comment period. The following changes have been proposed to the Swap Margin Rule:
- To provide relief by allowing legacy swaps—swaps that were entered into before the applicable compliance date of the Swap Margin Rule—to be amended to replace the existing interest rate provisions based on certain interbank offered rates (IBORs) and other interest rates that are reasonably expected to be discontinued or are reasonably determined to have lost their relevance as a reliable benchmark due to a significant impairment, without such swaps losing their legacy status.
- To amend requirements of the Swap Margin Rule for inter-affiliate swaps. The proposal would repeal the requirement for a covered swap entity to collect initial margin from its affiliates, but would retain the requirement that variation margin be exchanged for affiliate transactions.
- To add an additional initial margin compliance period for certain smaller counterparties and clarify the existing trading documentation requirements.
- To amend the Swap Margin Rule to permit amendments caused by conducting certain routine life-cycle activities that covered swap entities may conduct for legacy swaps, such as reduction of notional amounts and portfolio compression exercises, without triggering margin requirements.
Comment Due Date: January 23, 2020
Keywords: Americas, US, Banking, Securities, Swap Margin Rule, IBOR, Margin Requirements, Initial Margin, Interest Rate Benchmark, Legacy Swaps, US Agencies
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