US Agencies on Legacy Swaps Affected by Brexit and Swap Margin Rule
FED and OCC issued a joint statement explaining that they will exercise discretion and will not recommend taking enforcement action if a covered swap entity is a party to a legacy swap that was amended under certain conditions, consistent with the intent of Swap Margin Rule. The no-action statement would allow legacy swaps—those entered into before the firm’s compliance date with the Swap Margin Rule—to maintain grandfathered treatment if transferred out of UK to EU or US, subject to specific conditions and time limitations.
The US Agencies (namely, Farm Credit Administration, FDIC, FED, FHFA, and OCC) had amended the Swap Margin Rule, in July 2020, to assist covered swap entities as they prepared for the withdrawal of UK from EU. This Brexit amendment to the Swap Margin Rule was intended to address a covered swap entity’s ability to service cross-border clients in the event that UK withdrew from EU without a Withdrawal Agreement; if that happens, the Brexit amendment provides that any legacy swap that is exempt from the Swap Margin Rule would not become subject to margin requirements by virtue of being modified solely for the purpose of transferring such swap from a UK entity to an affiliate located in EU or U.S. The relief does not apply if UK and EU enter into a Withdrawal Agreement because the agencies formulated the Brexit amendment on the premise that a Withdrawal Agreement would preserve passporting rights between UK and EU. FED and OCC believe it is appropriate to provide certainty to covered swap entities operating in the affected jurisdictions regarding the legacy status of transferred swaps, in light of the uncertainty about whether EU will agree to a free trade agreement granting UK companies passporting rights related to financial services. Therefore, FED and OCC staff would not recommend that their respective agencies take action if a covered swap entity is a party to a legacy swap that was amended under the conditions specified in the joint statement.
Related Links
Keywords: Americas, US, Banking, Securities, Swap Margin Rule, Legacy Swap, Brexit, EU, UK, US Agencies
Previous Article
HKMA Revises Submission Timelines for Several Existing ReturnsRelated Articles
BIS and Central Banks Experiment with GenAI to Assess Climate Risks
A recent report from the Bank for International Settlements (BIS) Innovation Hub details Project Gaia, a collaboration between the BIS Innovation Hub Eurosystem Center and certain central banks in Europe
Nearly 25% G-SIBs Commit to Adopting TNFD Nature-Related Disclosures
Nature-related risks are increasing in severity and frequency, affecting businesses, capital providers, financial systems, and economies.
Singapore to Mandate Climate Disclosures from FY2025
Singapore recently took a significant step toward turning climate ambition into action, with the introduction of mandatory climate-related disclosures for listed and large non-listed companies
SEC Finalizes Climate-Related Disclosures Rule
The U.S. Securities and Exchange Commission (SEC) has finalized the long-awaited rule that mandates climate-related disclosures for domestic and foreign publicly listed companies in the U.S.
EBA Proposes Standards Related to Standardized Credit Risk Approach
The European Banking Authority (EBA) has been taking significant steps toward implementing the Basel III framework and strengthening the regulatory framework for credit institutions in the EU
US Regulators Release Stress Test Scenarios for Banks
The U.S. regulators recently released baseline and severely adverse scenarios, along with other details, for stress testing the banks in 2024. The relevant U.S. banking regulators are the Federal Reserve Bank (FED), the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC).
Asian Governments Aim for Interoperability in AI Governance Frameworks
The regulatory landscape for artificial intelligence (AI), including the generative kind, is evolving rapidly, with governments and regulators aiming to address the challenges and opportunities presented by this transformative technology.
EBA Proposes Operational Risk Standards Under Final Basel III Package
The European Union (EU) has been working on the final elements of Basel III standards, with endorsement of the Banking Package and the publication of the European Banking Authority (EBA) roadmap on Basel III implementation in December 2023.
EFRAG Proposes XBRL Taxonomy and Standard for Listed SMEs Under ESRS
The European Financial Reporting Advisory Group (EFRAG), which plays a crucial role in shaping corporate reporting standards in European Union (EU), is seeking comments, until May 21, 2024, on the Exposure Draft ESRS for listed SMEs.
ECB to Expand Climate Change Work in 2024-2025
Banking regulators worldwide are increasingly focusing on addressing, monitoring, and supervising the institutions' exposure to climate and environmental risks.