The Federal Reserve Board ("FRB"), Farm Credit Administration, Federal Housing Finance Agency and OCC (collectively, "the Agencies") proposed rule amendments governing margin requirements for uncleared swaps and security-based swaps. As previously covered, the FDIC approved the proposal in September.

The proposal would make five substantive changes to the margin rules: (i) removal of inter-affiliate initial margin, (ii) amendments to permit changes to "legacy" swaps relating to benchmarks, (iii) extension of the compliance period for initial margin, (iv) permission of non-material amendments to "legacy" transactions and (v) clarification regarding documentation requirements when initial margin is not exchanged due to the $50 million threshold.

In a published statement, FRB Governor Lael Brainard raised concerns over the proposed removal of inter-affiliate initial margin requirements. Ms. Brainard said that inter-affiliate derivatives transactions "represent a large share of uncleared swaps activity," and that the current rules recognize the different risks posed by those transactions versus third-party transactions. Ms. Brainard also criticized the proposal's reference to Regulation W ("Transactions between Member Banks and Their Affiliates"), saying that "while it is true that Regulation W could impose margining safeguards [on inter-affiliate swaps] . . . [it] has not yet been updated to reflect changes associated with the Dodd-Frank Act." According to Ms. Brainard, "there have been no discussions with policymakers on proposed amendments to Regulation W."

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