A proposal by the prudential regulators to conform their swap margin rules to the recently adopted rules restricting the cancellation rights of qualified financial contracts ("QFCs") in the event of certain resolution or bankruptcy proceedings (the "QFC Rules") was published in the Federal Register. Designated "prudential regulators" under Dodd-Frank include the Board of Governors of the Federal Reserve System, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Housing Finance Agency and the Office of the Comptroller of the Currency (collectively, the "Agencies").
As previously covered, under the proposed amendment, an agreement would not cease to be an "eligible master netting agreement" if it includes restrictions on the closeout netting required to comply with the QFC Rules. The agencies are proposing that legacy swaps, subject to the agreements that are amended to conform to the QFC Rules, would not be new swaps captured by the swaps margin rule by virtue of the amendment.
Comments on the proposal must be submitted by April 23, 2018.
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