Proposed Margin Requirements for Uncleared Swaps Under Dodd-Frank: Federal Reserve Board, OCC, FDIC, Farm Credit Administration and Federal Housing Finance Agency Repropose Rules for Minimum Margin and Capital Requirements for Certain Dealers and Major Participants in Swaps and Security-Based Swaps

Sullivan & Cromwell LLP - September 10, 2014

On September 3, 2014, the Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency (“OCC”), the Farm Credit Administration and the Federal Housing Finance Agency (collectively, the “Prudential Regulators”) issued a proposed rule to establish minimum initial and variation margin collection requirements for uncleared swaps entered into by certain swap dealers and major swap participants. The proposal supersedes the Prudential Regulators’ previous proposal originally issued in April 2011 (the “2011 Proposal”), is intended to take into account the comments received by the Prudential Regulators in response to the 2011 Proposal and follows the promulgation of the international framework for margin requirements of uncleared swaps, uncleared security-based swaps, foreign exchange forwards and foreign exchange swaps finalized in September 2013 by the Basel Committee on Banking Supervision and the Board of the International Organization of Securities Commissions. If adopted, the proposed rule would require that swap dealers and major swap participants subject to the jurisdiction of the Prudential Regulators collect and post minimum initial and variation margin amounts from and to certain swap counterparties, depending on the type of counterparty, in connection with swap transactions. Comments are due to the Prudential Regulators by sixty (60) days after publication in the Federal Register.