On September 17, the directors of the Federal Deposit Insurance Corporation (FDIC) approved a joint notice of proposed rulemaking (NPR) with respect to the prudential regulator margin rules for non-cleared swaps. The joint form of the NPR indicates that the other prudential swap regulators (the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Farm Credit Administration and the Federal Housing Finance Agency) will all be approving the same NPR in the near future.
The proposed rulemaking will make the following amendments to the prudential regulator swap margin rules:
- Add the additional phase-in year for initial margin (IM) that was recommended in July by The Basel Committee on Banking Supervision and the International Organization of Securities Commissions, so the initial margin phase-in threshold for 2020 will be $50 billion.
- Repeal the requirement that a swap dealer must collect initial margin from its affiliates.
- Permit swap dealers to postpone documentation with a financial counterparty until such time as initial margin or variation margin is actually required to be collected or posted.
- Allow parties to amend swaps executed before the compliance date of the margin rules without having the amended swap become subject to the margin rules if the reason for the amendment relates to (a) benchmark replacement; (b) portfolio compression; or (c) the reduction of the notional amount due to a novation.
A 30-day comment period will be open following publication in the Federal Register.
This approval strongly suggests that the CFTC and the SEC will be making similar changes to their respective swap margin rules.
FDIC Director Gruenberg dissented from the approval, which is available here.