US: SWAP Margin Rules Proposal Sept 18, 2019 23:08:03 GMT 4
Post by Sapphire Capital on Sept 18, 2019 23:08:03 GMT 4
The FDIC proposed amending its rules governing margin requirements for uncleared swaps and security-based swaps.
The proposal would make five substantive changes to the derivatives margin rules:
Inter-Affiliate Margin. The proposal would remove the requirement that dealers collect initial margin from their affiliates. (Variation margin would continue to be required.)
Benchmark Amendments. The proposal would not subject "legacy" transactions to margin requirements as a result of amendments to replace terms based on interbank offered rates (e.g., LIBOR) and other interest rates determined to have lost relevance as reliable benchmarks.
Compliance Period. The proposal would amend the compliance schedule for initial margin to conform to a recent BCBS-IOSCO statement providing that the September 2020 "phase-in" would apply to entities whose "daily aggregate notional amount" of swaps exceeds $50 billion over a measuring period, and that full compliance for all in-scope entities (i.e., those over $8 billion) would apply as of September 2021.
Non-Material Amendments. The proposal would permit "legacy" swaps to be amended for certain "life-cycle activities" without losing their legacy status.
Pre-Threshold Documentation. The proposal would clarify that documentation is required only at the time a dealer is required to collect or post margin (i.e., when the relevant amount exceeds the $50 million threshold permitted under the rules).
To date, only the FDIC has approved the proposal. It is expected that the OCC, the Federal Reserve Board, the Federal Housing Finance Agency and the Farm Credit Administration will also approve the proposal. Comments on the proposal must be submitted within 30 days of its publication in the Federal Register.