A 60-day comment period will start as early as Wednesday on proposed swap margin requirements to conform with recent rule changes imposing new restrictions on certain qualified financial contracts (QFCs) of systemically important banking organizations, according to filings Tuesday with the Federal Register.
Under the proposal made jointly by the Federal Reserve, Federal Deposit Insurance Corp. (FDIC), Office of the Comptroller of the Currency (OCC), the Farm Credit Administration (FCA) and the Federal Housing Finance Agency (FHFA), legacy swaps entered into before the applicable compliance date would not become subject to the margin requirements if they are amended solely to comply with the requirements of the QFC Rules.
“The proposed amendments would also harmonize the definition of ‘Eligible Master Netting Agreement’ in the Swap Margin Rule with recent changes to the definition of ‘Qualifying Master Netting Agreement’ in the respective capital and liquidity regulations of the Federal Reserve, FDIC and the OCC by recognizing the restrictions that were adopted by these agencies with respect to the QFC Rules,” the agencies said in their statement.
The three banking agencies adopted their rules last fall; the rules went into effect Jan. 1.
According to the Fed, the Swap Margin Rule was issued in November 2015 by the Farm Credit Administration, the FDIC, the FHFA, the Federal Reserve, and the OCC. The rule established minimum margin requirements for swaps and security-based swaps that are not cleared through a clearinghouse. The margin requirements are designed, the Fed stated, to help ensure the safety and soundness of swap entities and reduce risks to the stability of the financial system associated with non-cleared swaps activity.