December 3, 2015

U.S. Prudential Regulators Publish Rules on Margin and Capital Requirements for Covered Swap Entities (Fed. Reg.)

Five federal agencies ("the Agencies") published interim and final rules on margin and capital requirements for registered swap dealers, major swap participants, security-based swap dealers and major security-based swap participants. The Office of the Comptroller of the Currency ("OCC"), the Board of Governors of the Federal Reserve System ("FRB"), the Federal Deposit Insurance Corporation ("FDIC"), the Farm Credit Administration ("FCA") and the Federal Housing Finance Agency ("FHFA") published the rules in the Federal Register.

The final rule implements Dodd-Frank Sections 731 ("Registration and Regulation of Swap Dealers and Major Swap Participants") and 764 ("Registration of Regulation of Security-Based Swap Dealers and Major Security-Based Swap Participants"). These sections require the agencies to jointly adopt rules to establish capital requirements, as well as initial and variation margin requirements, for swap entities on all non-cleared swaps and non-cleared security-based swaps to offset the greater risk to such entities and the financial system arising from the use of swaps and security-based swaps that are not cleared.

The effective date for the final rule is April 1, 2016. The phase-in of the minimum margin requirements will not begin until September 1, 2016. The effective date for the interim final rule is April 1, 2016. The deadline for comment on the interim final rule is January 31, 2016.