ISDA Responds to Proposed Cross-Border Application of Swap Rules in US
ISDA issued a comment letter to CFTC regarding the proposal on cross-border application of registration thresholds and certain requirements applicable to swap dealers and major swap participants. The proposal was published in the Federal Register in January 2020. ISDA has commended the efforts of CFTC to recalibrate its cross-border regime through the rulemaking process and has identified four aspects of the proposal that warrant additional consideration by CFTC.
ISDA supports the proposed holistic, outcomes-based approach to issuing comparability determinations. It agrees that CFTC should assess the laws of foreign jurisdictions based on a common set of principles, with an understanding that jurisdictions may have implemented the G-20 derivatives reforms from slightly different perspectives. It also agrees that CFTC should look to adopt a substituted compliance regime based on comparable, rather than identical, approaches to derivatives regulations. To further refine the cross-border regime, ISDA has identified four aspects of the proposal that warrant additional consideration by CFTC:
- ANE Transactions—ANE transactions refer to transactions between non-U.S. swap entities and non-U.S. persons that are arranged, negotiated, or executed by U.S. personnel. In the final rule, ISDA requests CFTC to confirm that other Title VII requirements, including clearing, trading, and real-time reporting rules will not apply to ANE transactions and Foreign Branch ANE Transactions.
- Cross-Border Application of the Swap Dealer De Minimis Threshold—Consistent with the current treatment of non-U.S. persons, ISDA requests that CFTC, for purposes of registration requirements, exempt Other Non-U.S. Persons from counting swaps toward their de minimis threshold when trading swaps with a Guaranteed Entity that is an affiliate of an swap dealer.
- Application of Category B and C Requirements—As a general matter, Category B requirements should not apply to U.S. branches of non-U.S. swap entities and Guaranteed Entities when they are transacting with Other Non-U.S. Persons.
- Definition of Swap Conducted through a U.S. Branch—CFTC should clarify that making or receiving payments alone would not trigger the definition of a “swap conducted through a U.S. branch.”
ISDA also requests CFTC, in the final rule, to address three issues not included in the proposal that are intrinsic to the overall cross-border framework. These are related to cross-border application of real-time reporting and swap execution facility execution requirements, cross-border application of regulatory reporting requirements, and counterparty representations.
Related Links
Keywords: Americas, US, Banking, Securities, Cross-Border, Swaps, Commodity Exchange Act, Swaps Reform, CFTC, ISDA
Previous Article
ESMA Consults on Regulatory Standards Under Benchmarks RegulationRelated Articles
APRA Sets LAC for D-SIBs, Proposes to Enhance Crisis Preparedness
APRA issued a letter on the loss-absorbing capacity (LAC) requirements for domestic systemically important banks (D-SIBs) and published a discussion paper, along with the proposed the prudential standards on financial contingency planning (CPS 190) and resolution planning (CPS 900).
EC to Review Macro-Prudential Rules while ESRB Assesses Policy Stance
The European Commission (EC) launched a call for evidence, until March 18, 2022, as part of a comprehensive review of the macro-prudential rules for the banking sector under the Capital Requirements Regulation (CRR) and Directive (CRD IV).
FSB Sets Out Good Practices for Crisis Management Groups
The Financial Stability Board (FSB) published a report that sets out good practices for crisis management groups.
APRA Penalizes Heritage Bank for Incorrect Reporting of Capital
The Australian Prudential Regulation Authority (APRA) found that Heritage Bank Limited had incorrectly reported capital because of weaknesses in operational risk and compliance frameworks, although the bank did not breach minimum prudential capital ratios at any point and remains well-capitalized.
OSFI Releases Annual Report 2021-2022
The Office of the Superintendent of Financial Institutions (OSFI) released the annual report for 2020-2021.
OSFI Updates Timeline for Implementation of Certain Basel Rules
Through a letter addressed to the banking sector entities, the Office of the Superintendent of Financial Institutions (OSFI) announced deferral of the domestic implementation of the final Basel III reforms from the first to the second quarter of 2023.
EC Defers Adoption of Regulatory Standards for Disclosures Under SFDR
EIOPA recently published a letter in which EC is informing the European Parliament and Council that it could not adopt the set of draft regulatory technical standards for disclosures under the Sustainable Finance Disclosure Regulation (SFDR) within the stipulated three-month period, given their length and technical detail.
FCA Releases MIFIDPRU Application Forms and Third Set of Rules on IFPR
The Financial Conduct Authority (FCA) published the third in a series of policy statements that set out rules to introduce the UK Investment Firm Prudential Regime (IFPR), which will take effect on January 01, 2022.
APRA Finalizes Capital Adequacy Standards for Banks
The Australian Prudential Regulation Authority (APRA) published, along with a summary of its response to the consultation feedback, an information paper that summarizes the finalized capital framework that is in line with the internationally agreed Basel III requirements for banks.
CPMI-IOSCO Seek Comments on Access to Central Clearing and Portability
The Committee on Payments and Market Infrastructures (CPMI) and the International Organization of Securities Commissions (IOSCO) issued a consultative report focusing on access to central counterparty (CCP) clearing and client-position portability.
