Comments are due Dec. 9 to federal banking agencies on a joint-agencies proposal to revise swap margin rules to remove the need for holding initial margin for uncleared swaps with affiliates.
The proposal was first announced in September by the Federal Deposit Insurance Corp. (FDIC), with Board Member Martin Gruenberg dissenting. Federal Reserve Board Gov. Lael Brainard also issued dissented, noting she backed portions of the proposed rule but raising concerns about the elimination of the inter-affiliate initial margin requirement without making compensating adjustments elsewhere in regulation.
The five agencies signing off on the proposed rule, besides the FDIC and Fed Board, include the Office of the Comptroller of the Currency (OCC), Farm Credit Administration, and Federal Housing Finance Board (FHFB). In a statement Oct. 28, the agencies said the Fed Board “continues to work on proposed amendments to Regulation W that would, among other things, clarify the treatment of bank-affiliate derivatives under sections 23A and 23B.” Regulation W addresses additional requirements for affiliate transactions.
To aid in the transition away from LIBOR, the proposed rule also would allow certain technical amendments to legacy swaps without altering their status under the swap margin rules, the agencies said.
For smaller counterparties, the proposal would provide clarification on documentation requirements and implementation relief. It also would extend the effective date by one year to Sept. 1, 2021, for smaller counterparties to meet initial margin requirements.