Swap Entities Regulation - Pushout Provision

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Gavel.png CONGRESSIONAL UPDATE, DEC. 2014: On December 11, 2014, the U.S. House of Representatives passed an omnibus spending bill that would roll back the swaps pushout provision. The Senate passed the bill the following day, and the bill is awaiting signature by the President.
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Background

Section 716 of the Dodd-Frank Act, the "swaps pushout provision," specifically prohibits insured depositary institutions - banks, savings associations and insured federal branches - from using any Federal assistance, such as FDIC loans or emergency aid from the Federal Reserve discount window, for swap-related activity (except for certain "conforming swap activities," as defined under section 716(d) of Dodd-Frank. However, Section 716(f) allowed for the possibility of a transition period to allow such institutions time to wind down non-conforming swap activities.

The pushout provision also goes by the nickname "The Lincoln Amendment" as it was a late addition to the Dodd-Frank Act, proposed by then-U.S. Senator Blanche Lincoln of Arkansas.[2]

Summary of Final Rules by Prudential Regulators

In April 2012, the Office of the Comptroller of the Currency (OCC) and other Prudential Regulators had previously issued joint guidance that set an effective date for the rule of July 16, 2013. To view the April 2012 guidance, click HERE.

On January 4, 2013, the Office of the Comptroller of the Currency (OCC) issued guidance that allows for up to a two year transition period for entities requesting it. (VIEW OCC GUIDANCE).

On June 5, 2013, the Federal Reserve Board issued an interim final rule and request for comment on Regulation KK, the prohibition against Federal assistance to swap entities. On December 24, 2013, the Federal Reserve published a final rule that adopts the interim rule without change.(VIEW FINAL RULE

References

  1. U.S. Spending Fight Moves to Senate After Narrow House Passage. Bloomberg. Retrieved on December 12, 2014.
  2. Fed weighs foreign banks derivatives deal. Financial Times. Retrieved on January 2, 2014.

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