FRB Approves Final Rule Clarifying Treatment of Uninsured U.S. Branches of Foreign Banks under "Lincoln"

The Board of Governors of the Federal Reserve System ("FRB") approved a final rule titled Prohibition Against Federal Assistance to Swaps Entities ("Regulation KK"), which clarifies the treatment of uninsured U.S. branches and agencies of foreign banks under Dodd-Frank Section 716, commonly known as "Lincoln", or as the swaps push-out provision. The final rule adopts without change the interim final rule issued by the Board on June 5, 2013.

Section 716 of Dodd-Frank generally prohibits the provision of certain types of federal assistance, such as discount window lending and deposit insurance, to swaps entities, as defined in Section 716. The provisions of section 716 became effective on July 16, 2013.

Insured depository institutions that are swaps entities are eligible for a transition period of up to 24 months to comply and for certain statutory exceptions. The final rule clarifies that, for the purposes of Section 716, uninsured U.S. branches and agencies of foreign banks are treated as insured depository institutions. Thus, they are eligible to apply for a transition period and are treated as insured depository institutions for the purposes of the other provisions of Section 716.

The final rule also sets forth the process for state member banks and uninsured state branches or agencies of foreign banks that applied to the Board for the transition period.

The final rule is effective January 31, 2014.

See: Text of the Final Rule.See generally: To view a discussion of Dodd-Frank Section 716, link here: The Lincoln Amendment: Banks, Swap Dealers National Treatment and the Future of the Amendment (accessible to Cabinet subscribers only).Related news: FRB Provides Lincoln (Push Out) Relief to U.S. Branches of Non-U.S. Banks (Regulation KK) (with Cammarn Comment)(June 5, 2013).