2018-02560: Margin and Capital Requirements for Covered Swap Entities; Proposed Rule

Summary

The Board, OCC, FDIC, FCA, and FHFA (each an Agency and, collectively, the Agencies) are seeking comment on proposed amendments to the minimum margin requirements for registered swap dealers, major swap participants, security-based swap dealers, and major security- based swap participants for which one of the Agencies is the prudential regulator (Swap Margin Rule). The Agencies are proposing these amendments in light of the rules recently adopted by the Board, the OCC, and the FDIC that impose restrictions on certain non-cleared swaps and non-cleared security-based swaps and other financial contracts (Covered QFCs) (the QFC Rules). The QFC Rules amend the definition of "Qualifying Master Netting Agreement" in the Federal banking agencies' regulatory capital and liquidity rules to ensure that a Covered QFC is not prevented from being part of a Qualifying Master Netting Agreement solely because the Covered QFC conforms to the new requirements in the QFC Rules. The FCA also plans to propose amendments to its capital rules, including potential revisions to its regulatory definition of "Qualifying Master Netter Agreement," which is expected to be identical to the definition used in the Federal banking agencies' regulatory capital and liquidity rules. The Agencies are proposing to amend the definition of "Eligible Master Netting Agreement" in the Swap Margin Rule so that it remains harmonized with the amended definition of "Qualifying Master Netting Agreement" in the Federal banking agencies' regulatory capital and liquidity rules, and amendments to the capital rules that the FCA separately plans to propose. This proposed rule would also ensure that netting agreements of firms subject to the Swap Margin Rule are not excluded from the definition of "Eligible Master Netting Agreement" based solely on their compliance with the QFC Rules. The Agencies are also proposing that any legacy non-cleared swap or non-cleared security-based swap (i.e., a non-cleared swap or non-cleared security- based swap entered into before the applicable compliance date) that is not subject to the margin requirements of the Swap Margin Rule would not become subject to the provisions of the Swap Margin Rule if the non-cleared swap or non-cleared security-based swap is amended solely to comply with the requirements of the QFC Rules.

The agency’s own summary, as published.

What this changes

Amends 4 parts of the Code of Federal Regulations — the standing rules this notice rewrites.

• 12 CFR 45 Margin and Capital Requirements for Covered Swap Entities
• 12 CFR 237 Swaps Margin and Swaps Push-out (Regulation KK)
• 12 CFR 349 Derivatives
• 12 CFR 624 Margin and Capital Requirements for Covered Swap Entities