US Agencies Adopt Interim Rule to Facilitate Transfers of Legacy Swaps
US Agencies (FCA, FDIC, FED, FHFA, and OCC) are adopting and inviting comments on an interim final rule that amends the 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). Although the interim final rule will be effective on March 19, 2019, the agencies will be accepting comments on the rule by April 18, 2019.
The Swap Margin Rule takes effect under a phased compliance schedule stretching from 2016 through 2020. The dealers covered by the rule continue to hold swaps in their portfolios that were entered into before the effective dates of the rule. These swaps are grandfathered from the Swap Margin Rule’s requirements until they expire according to their terms. There are currently financial services firms located within UK that conduct swap dealing activities subject to the Swap Margin Rule. The UK has provided a formal notice of its intention to withdraw from EU on March 29, 2019. If this transpires without a negotiated agreement between UK and EU, these entities located in the UK may not be authorized to provide full-scope financial services to swap counterparties located in EU.
The US Agencies’ policy objective in developing the interim final rule is to address one aspect of the scenario likely to ensue, whereby entities located in the UK might transfer their existing swap portfolios that face counterparties located in EU over to an affiliate or other related establishment located within EU or U.S. The US Agencies seek to address industry concerns about the status of grandfathered swaps in this scenario, to enable the industry to focus on making preparations for swap transfers. These transfers, if carried out in accordance with the conditions of the interim final rule, will not trigger the application of the Swap Margin Rule to grandfathered swaps that were entered into before the compliance dates of the Swap Margin Rule.
Related Links
Comment Due Date: April 18, 2019
Effective Date: March 19, 2019
Keywords: Americas, Europe, UK, EU, US, Banking, Securities, Swap Margin Rule, Legacy Swaps, Brexit, US Agencies
Previous Article
G20 Publishes Communiqué on Its June Meeting in JapanRelated Articles
BIS Quarterly Review Discusses Developments in Fintech and ESG Space
BIS published the September issue of the Quarterly Review, which contains special features that analyze the rapid rise in equity funding for financial technology firms, the effectiveness of policy measures in response to pandemic, and the evolution of international banking.
BCBS to Consult on Supervisory Practices for Climate Risks by Year-End
The Basel Committee for Banking Supervision (BCBS) met in September 2021 and reviewed climate-related financial risks, discussed impact of digitalization, and welcomed efforts by the International Financial Reporting Standards (IFRS) Foundation to develop a common set of sustainability reporting standards
OCC Identifies Operational Risk Deficiencies in MUFG Union Bank
The Office of the Comptroller of the Currency (OCC) issued a Cease and Desist Order against MUFG Union Bank for deficiencies in technology and operational risk governance.
EC Rule on Contractual Recognition of Write Down and Conversion Powers
The European Commission (EC) published the Delegated Regulation 2021/1527 with regard to the regulatory technical standards for the contractual recognition of write down and conversion powers.
ECB to Consider Climate Risks When Reviewing Collateral Framework
In a response to the questions posed by a member of the European Parliament, the President Christine Lagarde highlighted the commitment of the European Central Bank (ECB) to an ambitious climate-related action plan along with a roadmap, which was published in July 2021.
SRB Provides Update on Approach to Prior Permissions Regime
The Single Resolution Board (SRB) published a Communication on the application of regulatory technical standard provisions on prior permission for reducing eligible liabilities instruments as of January 01, 2022.
APRA Issues Further Guidance on Application of Securitization Standard
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to provide guidance to authorized deposit-taking institutions on the interpretation of APS 120, the prudential standard on securitization.
ACPR Publishes Corrective Version of RUBA Taxonomy
The French Prudential Control and Resolution Authority (ACPR) published the corrective version of the RUBA taxonomy Version 1.0.1, which will come into force from the decree of January 31, 2022.
Nordea Bank and EIB Sign Agreement to Fund Green Projects in Nordics
The European Commission (EC) announced that Nordea Bank has signed a guarantee agreement with the European Investment Bank (EIB) Group to support the sustainable transformation of businesses in the Nordics.
APRA Publishes FAQs on Capital Treatment of Overseas Subsidiaries
The Australian Prudential Regulation Authority (APRA) published a new set of frequently asked questions (FAQs) to clarify the regulatory capital treatment of investments in the overseas deposit-taking and insurance subsidiaries.
