U.S. "prudential regulators" (i.e., the Federal Reserve Board, the Office of the Comptroller of the Currency, the FDIC, Farm Credit Administration, and FHFA) adopted amendments to uncleared swap margin requirements. Among other things, the amendments clarify that "legacy" swaps that have not been subject to margin requirements will not become subject to margin requirements if they are amended solely to comply with the new regulations restricting certain qualified financial contracts of systemically important banking organizations (QFC Rules) - which limit the ability of counterparts to close out swaps and certain other financial contracts with banks. (See previous coverage here.)
The amendments will become effective 30 days following publication in the Federal Register.
Commentary / Nihal Patel
As previously noted, the swaps margin rules take an unnecessarily restrictive view of what constitutes an "amendment" that would bring a legacy swap in scope for margin requirements. In adopting these straightforward amendments relating to the QFC Rules, the bank regulators declined to address the broader issue regarding the effect of amendments, despite a push from a number of commenters. (Pages 14-16 of the adopting release outline the various proposals from commenters to address problems relating to amendments to existing swaps.) The prudential regulators resisted commenters' urging and adopted the QFC-related Rules as proposed.
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