CFTC Approves Rules on Swap Clearing and Margin Requirements
CFTC, at its open meeting in April 2020, approved certain proposed rules and final rules. One of the proposed rules includes amendments to part 50 clearing requirements for central banks, sovereigns, international financial institutions, bank holding companies, and community development financial institutions. The comment period for this proposed rule ends on July 13, 2020. One of the adopted final rules amends the margin requirements for uncleared swaps for swap dealers and major swap participants for which there is no prudential regulator; the rule is being amended to add the European Stability Mechanism to the list of entities that are expressly excluded from the definition of financial end-user under CFTC regulation 23.151. This final rule will become effective on June 10, 2020.
Proposed Amendments to Part 50 Clearing Requirements
CFTC approved proposed amendments to the regulations governing which swaps are exempt from the clearing requirement in section 2(h)(1) of the Commodity Exchange Act. The proposed amendments would address the treatment of swaps entered into by certain central banks, sovereign entities, and international financial institutions. The proposed rulemaking also addresses four no-action letters that the Division of Clearing and Risk of CFTC issued in 2013 and 2017. CFTC is also proposing amendments to exempt from required clearing swaps entered into by certain bank holding companies, savings and loan holding companies, and community development financial institutions. CFTC is proposing to re-codify the regulatory provisions exempting eligible banks, savings associations, farm credit institutions, and credit unions from the definition of “financial entity” for purposes of section 2(h)(7)(A) of the Commodity Exchange Act by moving the current requirements to a separate rule. Additionally, CFTC is proposing to publish a compliance schedule setting forth all the past compliance dates for the 2012 and 2016 swap clearing requirement regulations. The proposal also includes other non-substantive technical amendments.
Final Rule on Amendments to Part 23 Margin Requirements for the European Stability Mechanism
CFTC approved a final rule that codifies a CFTC No-Action Letter 19-22 concerning the European Stability Mechanism (ESM). Letter 19-22 states that the Division of Swap Dealer and Intermediary Oversight (DSIO) will not recommend an enforcement action against a registered swap dealer that does not follow the uncleared margin rules with respect to swaps entered into with the European Stability Mechanism. In October 2019, CFTC proposed to codify CFTC Letter No. 17-34 and amend regulation 23.151 to exclude the European Stability Mechanism from the definition of financial end-user and thus exempt from the CFTC Margin Rule uncleared swaps entered into by the European Stability Mechanism. On CFTC approval of the publication of the proposal, DSIO issued staff no-action letter 19-22, which modified the no-action relief under Letter 17-34. CFTC also proposed to correct a typographical error in CFTC regulation 23.157. CFTC is adopting the amendments to regulations 23.151 and 23.157 as proposed.
Related Links
Comment Due Date: July 13, 2020
Effective Date: June 10, 2020
Keywords: Americas, US, Banking, Securities, Swaps, Clearing Requirement, Commodity Exchange Act, Margin Requirements, Margin Rules, Derivatives, CFTC
Previous Article
APRA Publishes Guidance for Reporting Loan Payment DeferralsRelated Articles
HKMA Consults on Supervisory Policy for OTC Derivatives Transactions
HKMA is consulting on revisions to the Supervisory Policy Manual module CR-G-14 on margin and other risk mitigation standards for non-centrally cleared over-the-counter (OTC) derivatives transactions.
PRA on Regulatory Capital and IFRS 9 Requirements for Payment Holidays
PRA provided further information on the application of regulatory capital and IFRS 9 requirements to payment holidays granted or extended to address the challenges arising from COVID-19 outbreak.
HKMA on Fintech Adoption and Innovation by Banks in Hong Kong
HKMA announced the publication of a report on fintech adoption and innovation in the banking industry in Hong Kong.
BIS on Impact of Increasing Use of Cloud Technology on Cyber Risk
BIS published a working paper that examines the drivers of cyber risk, especially in context of the cloud services.
ECB Consults on Guide for Managing Climate and Environmental Risks
ECB launched consultation on a guide specifying how the Banking Supervision expects banks to consider climate-related and environmental risks in their governance and risk management frameworks and when formulating and implementing their business strategy.
ECB Issues Opinion on Revisions to CRR in Response to COVID Crisis
ECB published an opinion (CON/2020/16) on amendments to the prudential framework in EU in response to the COVID-19 pandemic.
EBA Assesses Interlinkages Between Recovery and Resolution Planning
EBA published a report that examines the interlinkages between recovery and resolution planning under the Bank Recovery and Resolution Directive (BRRD).
SRB Publishes Final MREL Policy Under the Banking Package
SRB published the final Minimum Requirements for Own Funds and Eligible Liabilities (MREL) policy under the Banking Package.
US Agencies Amend Interim Final Rule on Transition Period for CECL
US Agencies (FDIC, FED, and OCC) published a final rule that makes technical changes to the March 31, 2020 interim final rule that provides a five-year transition period for the impact of the current expected credit loss (CECL) methodology on regulatory capital.
ECB Releases Results of March Survey on Credit Terms and Conditions
ECB published results of the March 2020 survey on credit terms and conditions in euro-denominated securities financing and over-the-counter (OTC) derivatives markets.
