News Release 2020-83 | June 25, 2020

Joint Release

Board of Governors of the Federal Reserve System
Farm Credit Administration
Federal Deposit Insurance Corporation
Federal Housing Finance Agency
Office of the Comptroller of the Currency

Five federal agencies have finalized changes to their swap margin rule to facilitate the implementation of prudent risk management strategies at banks and other entities with significant swap activities.

Under the final rule, entities that are part of the same banking organization generally will no longer be required to hold a specific amount of initial margin for uncleared swaps with each other, known as inter-affiliate swaps. Inter-affiliate swaps typically are used for internal risk management purposes by transferring risk to a centralized risk management function within the firm. The final rule will give firms additional flexibility to allocate collateral internally and support prudent risk management and safety and soundness.

Inter-affiliate swaps will remain subject to variation margin requirements, and initial margin will still be required if a depository institution’s total exposure to all affiliates exceeds 15 percent of its Tier 1 capital.

To help transition from LIBOR to alternative reference rates, the final rule allows swap entities to amend legacy swaps to replace the reference to LIBOR or other reference rates that are expected to end without triggering margin exchange requirements. The final rule also clarifies that swap entities may conduct risk-reducing portfolio compression or make certain other non-substantive amendments to their legacy swap portfolios without altering their legacy status.

For smaller swap market participants, the agencies are finalizing as proposed the additional phased compliance period for the smallest covered swap entities and financial end-user counterparties. Simultaneously, the agencies are requesting comment on an interim final rule that extends the compliance date of the initial margin requirements of the swap margin rules to September 1, 2021, for swap entities and counterparties with average annual notional swap portfolios of $50 billion to $750 billion. This interim final rule also extends the initial margin compliance date to September 1, 2022, for counterparties with average annual notional swap portfolios of $8 billion to $50 billion. The final rule provides additional clarification on documentation requirements for smaller counterparties.

Comments on the interim final rule will be accepted for 60 days following publication in the Federal Register.

Related Links

Media Contacts

Federal Reserve Board
Darren Gersh
(202) 452-2955

FCA
Emily Yaghmour
(703) 883-4066

FDIC
Julianne Breitbeil
(202) 898-6895

FHFA
Cynthia Adcock
(202) 649-3030

OCC
Stephanie Collins
(202) 649-6870

IR Press

Recent Posts

Treasury Issues Final Rule Expanding CFIUS Coverage of Real Estate Transactions Around More Than 60 Military Installations

WASHINGTON – Today, the U.S. Department of the Treasury (Treasury), as Chair of the Committee…

3 days ago

U.S. Department of the Treasury’s CDFI Fund and Federal Housing Finance Agency Collaborate to Bolster CDFI Access to Capital

WASHINGTON—Today, the U.S. Department of the Treasury’s Community Development Financial Institutions Fund (CDFI Fund) and…

3 days ago

Report on U.S. Portfolio Holdings of Foreign Securities at Year-End 2023

Washington – The findings from the annual survey of U.S. portfolio holdings of foreign securities…

4 days ago

READOUT: U.S. Department of the Treasury Hosts Roundtable Discussion on the Financial Sector’s Response to Recent Hurricanes

WASHINGTON – The U.S. Department of the Treasury hosted a roundtable on October 30 with…

4 days ago

READOUT: Sixth Meeting of the Financial Working Group Between the United States and the People’s Republic of China

WASHINGTON – The United States and the People’s Republic of China held the sixth meeting…

4 days ago

Treasury Sanctions Key Members of La Linea, a Group Involved in Trafficking Fentanyl into the United States

WASHINGTON — Today, the Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned…

4 days ago