Financial Market Utilities Regulation: Federal Reserve Issues Final Rules Setting Forth Requirements for a Federal Reserve Bank to Open and Maintain Accounts for, and Provide Financial Services to, Designated Financial Market Utilities

Sullivan & Cromwell LLP - December 12, 2013

On December 6, 2013, the Board of Governors of the Federal Reserve System (the “Federal Reserve”) approved a final rule (the “Final Rules”) to amend Regulation HH (12 C.F.R., part 234), the rule relating to the financial market utilities (“FMUs”) that are designated as systemically important by the Financial Stability Oversight Council. The Final Rules set forth the conditions and requirements for Federal Reserve Banks to open and maintain accounts for, and provide financial services to, designated FMUs and authorize the payment of interest on balances maintained by designated FMUs at Federal Reserve Banks. The Final Rules are being adopted pursuant to Section 806(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorizes Federal Reserve Banks to establish and maintain accounts for and provide financial services to designated FMUs, and Section 806(c), which permits Federal Reserve Banks to pay interest on the balances maintained by designated FMUs.

The Final Rules are largely consistent with the proposed rules set forth in the Federal Reserve’s notice of proposed rulemaking, dated March 4, 2013. However, the Final Rules clarify several requirements.

The Final Rules will be effective 60 days from the date of their publication in the Federal Register.