Dodd-Frank

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On June 19, the Federal Reserve adopted a final rule that sets overall single counterparty credit limits for global systemically important banking entities (GSIBs) and US bank holding companies with at least $250 billion in total consolidated assets.

The new rule implements section 165(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires the Federal Reserve to impose limits on the amount of credit exposure that such a bank holding company or foreign banking organization can have to an unaffiliated company in order to reduce the risks arising from the company’s failure.
Continue Reading Federal Reserve Adopts Final Rule for Single Counterparty Credit Limit

On May 24, President Trump signed into law the Economic Growth, Regulatory Relief and Consumer Protection Act. While the Act primarily serves to relieve smaller financial institutions from the burden of complying with certain requirements under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Act also directs the Securities and Exchange Commission to adopt amendments to Rule 701 under the Securities Act of 1933 (Securities Act) and so-called “Regulation A+,” as summarized below.  
Continue Reading Dodd-Frank Legislation Directs SEC to Amend Rule 701 and Regulation A+

On May 24, Public Law No. 115-74 was signed by President Trump. The law, also known as the Economic Growth, Regulatory Relief and Consumer Protection Act, has six parts:

  • Title I—Improving Consumer Access to Mortgage Credit
  • Title II—Regulatory Relief and Protecting Consumer Access to Credit
  • Tile III—Protections for Veterans, Consumers and Homeowners
  • Title IV—Tailoring Regulations for Certain Bank Holding Companies
  • Title V—Encouraging Capital Formation
  • Title VI—Protections for Student Borrowers

Continue Reading Economic Growth, Regulatory Relief and Consumer Protection Act

On May 30, the five Federal regulators responsible for the Volcker Rule approved the publication for comment of numerous proposed changes to the rule. The notice of proposed rulemaking, entitled Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds, was jointly developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission. The proposed changes are intended to streamline the rule by eliminating or modifying requirements that are not necessary to effectively implement the statute, without diminishing the safety and soundness of banking entities.
Continue Reading Regulators Propose Changes to Volcker Rule

On February 21, the US Supreme Court decided Digital Realty Trust, Inc. v. Somers (583 U.S. ____ (2018)), which resolved a circuit split related to whether the anti-retaliation provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, 124 Stat. 1376 (Dodd-Frank) extend to individuals who have not reported a securities law violation to the Securities and Exchange Commission and, therefore, falls outside of Dodd-Frank’s definition of a “whistleblower.”
Continue Reading Supreme Court Limits Scope of Dodd-Frank Whistleblower Protections

On February 5, the Prudential Regulators—the five federal banking regulators for swap dealers that are banks—proposed technical amendments to their margin rules for uncleared swaps. The amendments aim to harmonize the definition of Eligible Master Netting Agreement (EMNA) in the margin rules with recent changes made to the definition of “Qualifying Master Netting Agreement” (QMNA) in the capital and liquidity rules applicable to banks.
Continue Reading Conforming Amendments Proposed for Bank Swap Margin Rules

On November 30, the Commodity Futures Trading Commission issued No-Action Letter (NAL) 17-64, which extends, for an additional three years, swap reporting relief originally granted to most swap dealers established under the laws of Australia, Canada, the European Union, Japan or Switzerland (collectively, the “Enumerated Jurisdictions”) by NAL 13-75 (December 20, 2013). The relief continues to be unavailable to a non-US swap dealer in one of the Enumerated Jurisdictions that is affiliated with a US (1) swap dealer, (2) major swap participant, (3) bank, (4) bank holding company or (5) financial holding company.
Continue Reading CFTC Issues No-Action Letter Extending Swap Reporting Relief for Enumerated Jurisdictions

Starting January 3, 2018, physically settled foreign exchange forward transactions (FX Forwards) will be subject to the variation (but not initial) margin requirements set out in Commission Delegated Regulation (EU) 2016/2251 of October 4, 2016 (EU Margin Regulation) that apply generally to OTC derivatives. FX Forwards are defined in Article 27 of the EU Margin Regulation as “physically settled OTC derivative contracts that solely involve the exchange of two different currencies on a specific future date at a fixed rate agreed on the trade date of the contract covering the exchange.”
Continue Reading Reminder: EU Variation Margin Rules Apply to Physically Settled FX Forwards Beginning January 3, 2018

On October 13, the Commodity Futures Trading Commission and the European Commission (EC) made three announcements that are significant for cross-border swap activity between the United States and Europe.

  1. CFTC Margin Rule Comparability Determination.

The CFTC has made a determination that the margin rules for uncleared swaps that apply in the European Union are comparable to the CFTC’s margin rules. This determination activates the substituted compliance provisions found in Section 23.160(b)(2)(iii) of the CFTC margin rules that until now have not been available to EU entities registered as swap dealers.
Continue Reading Three Developments Concerning EU-US Cross-Border Swaps

On September 1, the Board of Governors of the Federal Reserve System adopted a final rule that will affect the rights of counterparties that enter into Qualified Financial Contracts (QFC) (e.g., derivatives, stock loans and repurchase agreements) with banks that have been designated as global systemically important banking organizations (GSIBs). This rule, which was proposed in 2016, would prohibit US GSIBs and their subsidiaries, and the US subsidiaries, branches, and agencies of foreign GSIBs, from entering into a QFC unless the counterparty to the contract has agreed contractually:

  • to abide by the 48-hour stay of QFC termination found in Title II of the Dodd-Frank Act and in the Federal Deposit Insurance Act;
  • to allow transfer of the QFC in the event of a resolution of its counterparty; and
  • to refrain from exercising cross-default termination rights arising from the resolution of an affiliate of its GSIB counterparty.

Continue Reading Federal Reserve Restricts Termination of Qualified Financial Contracts