Margin and Capital Requirements for Covered Swap Entities, 74915-74924 [2015-28670]

Download as PDF Vol. 80 Monday, No. 229 November 30, 2015 Part III Department of the Treasury Office of the Comptroller of the Currency 12 CFR Part 45 Federal Reserve System 12 CFR Part 237 Federal Deposit Insurance Corporation 12 CFR Part 349 Farm Credit Administration 12 CFR Part 624 asabaliauskas on DSK5VPTVN1PROD with RULES Federal Housing Finance Agency 12 CFR Part 1221 Margin and Capital Requirements for Covered Swap Entities; Interim Final Rule VerDate Sep<11>2014 19:38 Nov 27, 2015 Jkt 238001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\30NOR3.SGM 30NOR3 74916 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Part 45 [Docket No. OCC–2015–0023] RIN 1557–AD00 FEDERAL RESERVE SYSTEM 12 CFR Part 237 [Docket No. R–1415] RIN 7100–AD74 FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Part 349 RIN 3064–AE21 FARM CREDIT ADMINISTRATION 12 CFR Part 624 RIN 3052–AC69 FEDERAL HOUSING FINANCE AGENCY 12 CFR Part 1221 RIN 2590–AA45 Margin and Capital Requirements for Covered Swap Entities Office of the Comptroller of the Currency, Treasury (‘‘OCC’’); Board of Governors of the Federal Reserve System (‘‘Board’’); Federal Deposit Insurance Corporation (‘‘FDIC’’); Farm Credit Administration (‘‘FCA’’); and the Federal Housing Finance Agency (‘‘FHFA’’). ACTION: Interim final rule and request for comment. AGENCY: The OCC, Board, FDIC, FCA, and FHFA (each an ‘‘Agency’’ and, collectively, the ‘‘Agencies’’) are adopting and invite comment on an interim final rule that will exempt certain non-cleared swaps and noncleared security-based swaps with certain counterparties that qualify for an exception or exemption from clearing from the initial and variation margin requirements promulgated under sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the ‘‘Dodd-Frank Act’’ or the ‘‘Act’’). This interim final rule implements Title III of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (‘‘TRIPRA’’), which exempts from the Agencies’ swap margin rules non-cleared swaps and non-cleared asabaliauskas on DSK5VPTVN1PROD with RULES SUMMARY: VerDate Sep<11>2014 20:04 Nov 27, 2015 Jkt 238001 security-based swaps in which a counterparty qualifies for an exemption or exception from clearing under the Dodd-Frank Act. This interim final rule is a companion rule to the final rules adopted by the Agencies to implement section 731 and 764 of the Dodd-Frank Act. DATES: The interim final rule is effective April 1, 2016. Comments should be received on or before January 31, 2016. ADDRESSES: Interested parties are encouraged to submit written comments jointly to all of the Agencies. Commenters are encouraged to use the title ‘‘Margin and Capital Requirements for Covered Swap Entities’’ to facilitate the organization and distribution of comments among the Agencies. Office of the Comptroller of the Currency. Because paper mail in the Washington, DC area and at the OCC is subject to delay, commenters are encouraged to submit comments by the Federal eRulemaking Portal or email, if possible. Please use the title ‘‘Margin and Capital Requirements for Covered Swap Entities’’ to facilitate the organization and distribution of the comments. You may submit comments by any of the following methods: • Federal eRulemaking Portal— ‘‘regulations.gov’’: Go to http:// www.regulations.gov. Enter ‘‘Docket ID OCC–2015–0023’’ in the Search Box and click ‘‘Search’’. Results can be filtered using the filtering tools on the left side of the screen. Click on ‘‘Comment Now’’ to submit public comments. • Click on the ‘‘Help’’ tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for submitting public comments. • Email: regs.comments@ occ.treas.gov. • Mail: Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. • Hand Delivery/Courier: 400 7th Street SW., Suite 3E–218, Mail Stop 9W–11, Washington, DC 20219. • Fax: (571) 465–4326. Instructions: You must include ‘‘OCC’’ as the agency name and ‘‘Docket ID OCC–2015–0023’’ in your comment. In general, OCC will enter all comments received into the docket and publish them on the Regulations.gov Web site without change, including any business or personal information that you provide such as name and address information, email addresses, or phone numbers. Comments received, including attachments and other supporting materials, are part of the public record PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 and subject to public disclosure. Do not enclose any information in your comment or supporting materials that you consider confidential or inappropriate for public disclosure. You may review comments and other related materials that pertain to this rulemaking action by any of the following methods: • Viewing Comments Electronically: Go to http://www.regulations.gov. Enter ‘‘Docket ID OCC -2015–0023’’ in the Search box and click ‘‘Search’’. Comments can be filtered by Agency using the filtering tools on the left side of the screen. • Click on the ‘‘Help’’ tab on the Regulations.gov home page to get information on using Regulations.gov, including instructions for viewing public comments, viewing other supporting and related materials, and viewing the docket after the close of the comment period. • Viewing Comments Personally: You may personally inspect and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. For security reasons, the OCC requires that visitors make an appointment to inspect comments. You may do so by calling (202) 649–6700. Upon arrival, visitors will be required to present valid government-issued photo identification and to submit to a security screening in order to inspect and photocopy comments. • Docket: You may also view or request available background documents and project summaries using the methods described above. Board of Governors of the Federal Reserve System: You may submit comments, identified by Docket No. R– 1415 and RIN 7100–AD74, by any of the following methods: • Agency Web site: http:// www.federalreserve.gov. Follow the instructions for submitting comments at http://www.federalreserve.gov/apps/ foia/proposedregs.aspx. • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Email: regs.comments@ federalreserve.gov. Include the docket number in the subject line of the message. • Fax: (202) 452–3819 or (202) 452– 3102. • Mail: Address to Robert deV. Frierson, Secretary, Board of Governors of the Federal Reserve System, 20th Street and Constitution Avenue NW., Washington, DC 20551. All public comments will be made available on the Board’s Web site at http://www.federalreserve.gov/apps/ foia/proposedregs.aspx as submitted, E:\FR\FM\30NOR3.SGM 30NOR3 asabaliauskas on DSK5VPTVN1PROD with RULES Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations 74917 Constitution Center (OGC Eighth Floor), 400 7th St. SW., Washington, DC 20219. All comments received by the deadline will be posted for public inspection without change, including any personal information you provide, such as your name, address, email address and telephone number on the FHFA Web site at http://www.fhfa.gov. Copies of all comments timely received will be available for public inspection and copying at the address above on government-business days between the hours of 10 a.m. and 3 p.m. To make an appointment to inspect comments please call the Office of General Counsel at (202) 649–3804. Farm Credit Administration: We offer a variety of methods for you to submit your comments. For accuracy and efficiency reasons, commenters are encouraged to submit comments by email or through the FCA’s Web site. As facsimiles (fax) are difficult for us to process and achieve compliance with section 508 of the Rehabilitation Act, we are no longer accepting comments submitted by fax. Regardless of the method you use, please do not submit your comments multiple times via different methods. You may submit comments by any of the following methods: • Email: Send us an email at regcomm@fca.gov. • FCA Web site: http://www.fca.gov. Select ‘‘Law & Regulation,’’ then ‘‘FCA Regulations,’’ then ‘‘Public Comments,’’ then follow the directions for ‘‘Submitting a Comment.’’ • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. • Mail: Barry F. Mardock, Deputy Director, Office of Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102–5090. You may review copies of all comments we receive at our office in McLean, Virginia or on our Web site at http://www.fca.gov. Once you are in the Web site, select ‘‘Law & Regulation,’’ then ‘‘FCA Regulations,’’ then ‘‘Public Comments,’’ and follow the directions for ‘‘Reading Submitted Public Comments.’’ We will show your comments as submitted, including any supporting data provided, but for technical reasons we may omit items such as logos and special characters. Identifying information that you provide, such as phone numbers and addresses, will be publicly available. However, we will attempt to remove email addresses to help reduce Internet spam. FOR FURTHER INFORMATION CONTACT: OCC: Kurt Wilhelm, Director, Financial Continued unless modified for technical reasons. Accordingly, comments will not be edited to remove any identifying or contact information. Public comments may also be viewed electronically or in paper form in Room 3515, 1801 K Street NW. (between 18th and 19th Street NW.), Washington, DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays. Federal Deposit Insurance Corporation: You may submit comments, identified by RIN 3064– AE21, by any of the following methods: • Agency Web site: http:// www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the Agency Web site. • Email: Comments@FDIC.gov. Include RIN 3064–AE21 on the subject line of the message. • Mail: Robert E. Feldman, Executive Secretary, Attention: Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 20429. • Hand Delivery: Comments may be hand delivered to the guard station at the rear of the 550 17th Street Building (located on F Street) on business days between 7:00 a.m. and 5:00 p.m. Instructions: All comments received must include the agency name and RIN for this rulemaking and will be posted without change to https://www.fdic.gov/ regulations/laws/federal/, including any personal information provided. Federal Housing Finance Agency: You may submit your written comments on the interim final rulemaking, identified by regulatory information number: RIN 2590–AA45, by any of the following methods: • Agency Web site: www.fhfa.gov/ open-for-comment-or-input • Federal eRulemaking Portal: http:// www.regulations.gov. Follow the instructions for submitting comments. If you submit your comment to the Federal eRulemaking Portal, please also send it by email to FHFA at RegComments@fhfa.gov to ensure timely receipt by the Agency. Please include ‘‘RIN 2590–AA45’’ in the subject line of the message. • Hand Delivery/Courier: The hand delivery address is: Alfred M. Pollard, General Counsel, Attention: Comments/ RIN 2590–AA45, Federal Housing Finance Agency, Constitution Center (OGC Eighth Floor), 400 7th St. SW., Washington, DC 20219. Deliver the package to the Seventh Street entrance Guard Desk, First Floor, on business days between 9:00 a.m. and 5:00 p.m. • U.S. Mail, United Parcel Service, Federal Express, or Other Mail Service: The mailing address for comments is: Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590–AA45, Federal Housing Finance Agency, VerDate Sep<11>2014 19:59 Nov 27, 2015 Jkt 238001 PO 00000 Frm 00003 Fmt 4701 Sfmt 4700 Markets Group, (202) 649–6437, or Carl Kaminski, Special Counsel, Legislative and Regulatory Activities Division, (202) 649–5490, for persons who are deaf or hard of hearing, TTY (202) 649– 5597, Office of the Comptroller of the Currency, 400 7th Street SW., Washington, DC 20219. Board: Sean D. Campbell, Associate Director, (202) 452–3760, or Elizabeth MacDonald, Manager, Division of Banking Supervision and Regulation, (202) 475–6316; Anna M. Harrington, Counsel, (202) 452–6406, or Victoria M. Szybillo, Counsel, Legal Division, (202) 475–6325, Board of Governors of the Federal Reserve System, 20th and C Streets NW., Washington, DC 20551. FDIC: Bobby R. Bean, Associate Director, Capital Markets Branch, bbean@fdic.gov, Jacob Doyle, Capital Markets Policy Analyst, jdoyle@fdic.gov, Division of Risk Management Supervision, (202) 898–6888; Thomas F. Hearn, Counsel, thohearn@fdic.gov, or Catherine Topping, Counsel, ctopping@ fdic.gov, Legal Division, Federal Deposit Insurance Corporation, 550 17th Street NW., Washington, DC 20429. FCA: J.C. Floyd, Associate Director, Finance & Capital Market Team, Timothy T. Nerdahl, Senior Policy Analyst—Capital Markets, Jeremy R. Edelstein, Senior Policy Analyst, Office of Regulatory Policy, (703) 883–4414, TTY (703) 883–4056, or Richard A. Katz, Senior Counsel, Office of General Counsel, (703) 883–4020, TTY (703) 883–4056, Farm Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102–5090. FHFA: Robert Collender, Principal Policy Analyst, Office of Policy Analysis and Research, (202) 649–3196, Robert.Collender@fhfa.gov, or Peggy K. Balsawer, Associate General Counsel, Office of General Counsel, (202) 649– 3060, Peggy.Balsawer@fhfa.gov, Federal Housing Finance Agency, Constitution Center, 400 7th St. SW., Washington, DC 20219. The telephone number for the Telecommunications Device for the Hearing Impaired is (800) 877–8339. SUPPLEMENTARY INFORMATION: I. Background The Dodd-Frank Act was enacted on July 21, 2010.1 Title VII of the DoddFrank Act established a comprehensive new regulatory framework for derivatives, which the Act generally characterizes as ‘‘swaps’’ and ‘‘securitybased swaps.’’ 2 As part of this new 1 Public Law 111–203, 124 Stat. 1376 (2010). are defined in section 721 of the DoddFrank Act to include interest rate swaps, commodity-based swaps, equity swaps and credit 2 ‘‘Swaps’’ E:\FR\FM\30NOR3.SGM 30NOR3 74918 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations asabaliauskas on DSK5VPTVN1PROD with RULES regulatory framework, sections 731 and 764 of the Dodd-Frank Act added, respectively, a new section 4s to the Commodity Exchange Act of 1936 (the ‘‘Commodity Exchange Act’’), and a new section 15F to the Securities Exchange Act of 1934 (the ‘‘Securities Exchange Act’’), which require registration with the U.S. Commodity Futures Trading Commission (‘‘CFTC’’) of swap dealers and major swap participants and with the U.S. Securities and Exchange Commission (the ‘‘SEC’’) of securitybased swap dealers and major securitybased swap participants.3 These registrants are collectively referred to in this preamble as ‘‘swap entities.’’ Sections 731 and 764 of the DoddFrank Act require the Agencies to adopt joint rules that apply to all swap entities for which any one of the Agencies is the prudential regulator,4 imposing capital requirements and initial and variation margin requirements on all swaps and security-based swaps not cleared by a registered derivatives clearing organization or clearing agency (‘‘noncleared swaps’’).5 The Agencies initially proposed a joint rule to implement the capital and margin requirements of sections 731 and 764 on May 11, 2011 6 and re-proposed the rule on September 24, 2014 7 in light of the comments received by the Agencies on the original proposal and subsequent recommendations regarding the international framework for margin default swaps, and ‘‘security-based swaps’’ are defined in section 761 of the Dodd-Frank Act to include a swap based on a single security or loan or on a narrow-based security index. See 7 U.S.C. 1a(47); 15 U.S.C. 78c(a)(68). 3 See 7 U.S.C. 6s; 15 U.S.C. 78o–10. Section 731 of the Dodd-Frank Act requires swap dealers and major swap participants to register with the CFTC, which is vested with primary responsibility for the oversight of the swaps market under Title VII of the Dodd-Frank Act. Section 764 of the Dodd-Frank Act requires security-based swap dealers and major security-based swap participants to register with the SEC, which is vested with primary responsibility for the oversight of the security-based swaps market under Title VII of the Dodd-Frank Act. Section 712(d)(1) of the Dodd-Frank Act requires the CFTC and SEC to issue joint rules further defining the terms swap, security-based swap, swap dealer, major swap participant, security-based swap dealer, and major security-based swap participant. The CFTC and SEC issued final joint rulemakings with respect to these definitions in May 2012 and August 2012, respectively. See 77 FR 30596 (May 23, 2012); 77 FR 39626 (July 5, 2012) (correction of footnote in the Supplementary Information accompanying the rule); and 77 FR 48207 (August 13, 2012). 17 CFR part 1; 17 CFR parts 230, 240 and 241. 4 Section 1a(39) of the Commodity Exchange Act defines the term ‘‘prudential regulator’’ for purposes of the capital and margin requirements applicable to swap dealers, major swap participants, security-based swap dealers and major security-based swap participants. 7 U.S.C. 1a(39). 5 See 7 U.S.C. 6s(e)(2)(A); 15 U.S.C. 78o– 10(e)(2)(A). 6 76 FR 27564 (May 11, 2011). 7 79 FR 57348 (September 24, 2014). VerDate Sep<11>2014 19:38 Nov 27, 2015 Jkt 238001 requirements on non-cleared derivatives finalized by the Basel Committee on Banking Supervisions (‘‘BCBS’’) and the Board of the International Organization of Securities Commissions (‘‘IOSCO’’) in September 2013.8 In a separate action, the Agencies have adopted a joint final rule to implement these Dodd-Frank Act requirements (the ‘‘joint final rule’’). The capital and margin requirements under sections 731 and 764 of the DoddFrank Act apply to non-cleared swaps and complement other provisions of the Dodd-Frank Act that require the CFTC and SEC to make determinations as to whether certain swaps or security-based swaps, or a group, category, or class of such transactions, should be required to be cleared.9 If the CFTC or SEC has made such a determination, it is generally unlawful for any person to engage in such a swap or security-based swap unless the transaction is submitted to a derivatives clearing organization or clearing agency, as applicable, for clearing. The clearing requirements, however, do not apply to an entity that is not a financial entity, is using a swap or security-based swap to hedge or mitigate commercial risk, and notifies the applicable Commission, in a manner set forth by that Commission, how it generally meets its financial obligations.10 Thus, a particular swap or security-based swap might be subject to the capital and margin requirements of section 731 and 764 either because it is not subject to the mandatory clearing requirement, or because one of the parties to the swap is eligible for, and elects to use, an exception or exemption from the mandatory clearing requirement. Such a swap is a ‘‘noncleared’’ swap for purposes of the capital and margin requirements established under sections 731 and 764 of the Dodd-Frank Act. Sections 731 and 764 direct the Agencies to impose initial and variation margin requirements on all swaps that are not cleared. Under the proposed rule, the Agencies distinguished among 8 See BCBS and IOSCO ‘‘Margin requirements for non-centrally cleared derivatives,’’ (September 2013), available at https://www.bis.org/publ/ bcbs261.pdf. 9 7 U.S.C. 2(h); 15 U.S.C. 78c–3. The Commodity Exchange Act and the Securities Exchange Act set out standards that the CFTC and the SEC are required to apply when making determinations about clearing, which generally address whether a swap or security-based swap is sufficiently standardized to be cleared. 7 U.S.C. 2(h)(2)(D); 15 U.S.C. 78c–3(b)(4). To date, the CFTC has determined that certain interest rate swaps and credit default swaps are required to be cleared. 17 CFR 50.4. 10 See 7 U.S.C. 2(h)(7); 15 U.S.C. 78c–3(g). Further, the CFTC has authority to exempt swaps from the clearing requirement. 7 U.S.C. 6(c)(1). PO 00000 Frm 00004 Fmt 4701 Sfmt 4700 different types of counterparties on the basis of risk,11 and the Agencies addressed swaps for certain ‘‘other counterparties’’ including commercial end users by providing that a covered swap entity’s collection of margin from them was subject to the judgment of the covered swap entity. In particular, a covered swap entity was not required to collect initial and variation margin from these ‘‘other counterparties’’ as a matter of course; a covered swap entity was allowed to collect initial or variation margin at such times and in such forms and amounts (if any) as the covered swap entity determines appropriate in its overall credit risk management of the covered swap entity’s exposure to the customer.12 On January 12, 2015, President Obama signed into law TRIPRA.13 Title III of TRIPRA, the ‘‘Business Risk Mitigation and Price Stabilization Act of 2015,’’ amends the statutory provisions added by the Dodd-Frank Act relating to margin requirements for non-cleared swaps and non-cleared security-based swaps. Specifically, section 302 of TRIPRA’s Title III amends sections 731 and 764 of the Dodd-Frank Act to provide that the initial and variation margin requirements do not apply to certain transactions of specified counterparties that would qualify for an exemption or exception from clearing, as explained more fully below. Noncleared swaps and non-cleared securitybased swaps that are exempt under section 302 of TRIPRA will not be subject to the Agencies’ rules implementing margin requirements. In section 303 of TRIPRA, Congress required that the Agencies implement the provisions of Title III by promulgating an interim final rule and seeking public comment on the interim final rule.14 The Agencies are therefore promulgating this interim final rule with request for comment. The proposed rule of September 2014 would have allowed covered swap entities to 11 The joint final rule takes a similar approach. In implementing this risk-based approach, the final rule distinguishes among four separate types of swap counterparties: (i) Counterparties that are themselves swap entities; (ii) counterparties that are financial end users with a material swaps exposure; (iii) counterparties that are financial end users without a material swaps exposure, and (iv) other counterparties, including nonfinancial end users, sovereigns, and multilateral development banks. 12 See §§ l.3(d) and l.4(c) of the proposed rule. 13 Public Law 114–1, 129 Stat. 3 (2015). 14 Section 303 requires that ‘‘[t]he amendments made by this title to the Commodity Exchange Act shall be implemented . . . through the promulgation of an interim final rule . . .’’ The Agencies are interpreting this provision to apply to the amendments made by TRIPRA to the Securities Exchange Act as well. E:\FR\FM\30NOR3.SGM 30NOR3 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations asabaliauskas on DSK5VPTVN1PROD with RULES collect initial or variation margin from certain ‘‘other counterparties,’’ at their discretion. Additionally, covered swap entities would have been required to exchange variation margin with all financial end users, and initial margin with financial end users with material swap exposure. The effect of the interim final rule is to grant an exception from the margin requirements of the joint final rule for non-cleared swaps meeting certain criteria that covered swap entities enter into with certain ‘‘other counterparties’’ and certain financial end users.15 As noted above, swaps may be noncleared swaps either because (i) there is an exemption or exception from clearing available; or (ii) the CFTC or SEC, as applicable, has not determined that such swap or security-based swap is required to be cleared. The exclusions and exemptions from the joint final margin rule described below will apply to both categories of non-cleared swaps when they involve a counterparty that meets the requirements for an exception or exemption from clearing (e.g., a nonfinancial end user using swaps to hedge or mitigate commercial risk). Clearing requirements pursuant to the Commodity Exchange Act began to take effect with respect to certain interest rate and credit default swap indices swaps on March 11, 2013.16 Covered swap entities have accordingly already established methods and procedures to engage in transactions with counterparties that are eligible for the clearing exceptions or exemptions and for recording and reporting the eligibility of these transactions for the exception or exemptions as required under the statute.17 The Agencies expect these processes will function equally well as a basis for the parallel statutory exemptions from initial and variation margin requirements for non-cleared swaps implemented pursuant to this interim final rule. 15 The joint final rule also contains provisions allowing a covered swap entity to continue with the current practice of collecting initial or variation margin at such times and in such forms and amounts (if any) as the covered swap entity determines appropriate in its overall credit risk management of the swap entity’s exposure to the customer for ‘‘other counterparties.’’ The TRIPRA exemptions are transaction-based, as opposed to counterparty-based. For example, if a commercial end user enters into a non-cleared swap with a covered swap entity and the transaction does not qualify for an exception or exemption as described below, then the covered swap entity would treat the swap in accordance with the ‘‘other counterparties’’ provisions in §§ l.3 and l.4 of the joint final rule. See §§ l.3(d) and l.4(c) of the joint final rule. 16 17 CFR 50.25. See 77 FR 44441 (July 30, 2012). 17 See, e.g., 17 CFR 50.50(b). VerDate Sep<11>2014 20:04 Nov 27, 2015 Jkt 238001 II. Description of the Interim Final Rule This interim final rule, which adds a new § l.1(d) to the joint final rule, adopts the statutory exemptions and exceptions as required under TRIPRA. TRIPRA provides that the initial and variation margin requirements do not apply to the non-cleared swaps and non-cleared security-based swaps of three categories of counterparties. In particular, section 302 of TRIPRA amends sections 731 and 764 so that initial and variation margin requirements will not apply to a swap or security-based swap in which a counterparty (to a covered swap entity) is: (1) A non-financial entity (including small financial institution and a captive finance company) that qualifies for the clearing exception under section 2(h)(7)(A) of the Commodity Exchange Act or section 3C(g)(1) of the Securities Exchange Act; (2) A cooperative entity that qualifies for an exemption from the clearing requirements issued under section 4(c)(1) of the Commodity Exchange Act; or (3) A treasury affiliate acting as agent that satisfies the criteria for an exception from clearing in section 2(h)(7)(D) of the Commodity Exchange Act or section 3C(g)(4) of the Securities Exchange Act. A. Non-Financial Entities TRIPRA provides that the initial and variation margin requirements of the joint final rule shall not apply to a noncleared swap in which a counterparty qualifies for an exception under section 2(h)(7)(A) of the Commodity Exchange Act or section 3C(g)(1) of the Securities Exchange Act.18 Section 2(h)(7)(A) and section 3C(g)(1) except from clearing swaps where one of the counterparties is not a financial entity, is using the swap to hedge or mitigate commercial risk, and notifies the CFTC or SEC how it generally meets its financial obligations associated with entering into non-cleared swaps. A number of different types of counterparties may qualify for an exception from clearing under section 2(h)(7)(A) and section 3C(g)(1), including: non-financial end users, small banks, savings associations, Farm Credit System institutions, and credit unions. In addition, captive finance companies qualify for an exception from clearing under section 2(h)(7)(A).19 Non-financial end users: A counterparty that is not a financial 18 See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c–3(g)(1). is no corresponding exclusion under section 3C(g)(1) of the Securities Exchange Act for captive finance companies, likely because these entities generally do not engage in security-based swaps. 19 There PO 00000 Frm 00005 Fmt 4701 Sfmt 4700 74919 entity 20 (sometimes referred to as ‘‘nonfinancial end users’’ or ‘‘commercial end users’’) that is using swaps to hedge or mitigate commercial risk generally would qualify for an exception from clearing under section 2(h)(7)(A) or section 3C(g)(1) and thus from the requirements of the joint final rule for non-cleared swaps and non-cleared security-based swaps pursuant to § l.1(d). Small banks, savings associations, Farm Credit System institutions, and credit unions: The definition of ‘‘financial entity’’ in section 2(h)(7)(C)(ii) provides that the CFTC shall consider whether to exempt small banks, savings associations, Farm Credit System institutions, and credit unions with total assets of $10 billion or less. Pursuant to this authority, the CFTC has exempted small banks, savings associations, Farm Credit System institutions, and credit unions with total assets of $10 billion or less from the definition of ‘‘financial entity,’’ thereby permitting these institutions to avail themselves of the clearing exception when they are using swaps to hedge or mitigate risk.21 As a result, these small financial institutions that are using noncleared swaps to hedge or mitigate commercial risk would also qualify for an exemption from the initial and variation margin requirements of the joint final rule pursuant to § l.1(d). Similarly, section 3C(g) provides that the SEC shall consider whether to exempt small banks, savings associations, Farm Credit System institutions, and credit unions with total assets of $10 billion or less.22 If the SEC were to implement an exclusion for such entities from clearing, non-cleared security-based swaps with those entities would be eligible for the exemption in the Agencies’ margin rules pursuant to § l.1(d) as required under TRIPRA, provided they met the other 20 See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c–3(g)(1); 17 CFR 50.50. A ‘‘financial entity’’ is defined to mean (i) a swap dealer; (ii) a security-based swap dealer; (iii) a major swap participant; (iv) a major security-based swap participant; (v) a commodity pool; (vi) a private fund as defined in section 202(a) of the Investment Advisers Act of 1940; (vii) an employee benefit plan as defined in sections 3(3) and 3(32) of the Employment Retirement Income Security Act of 1974; (viii) a person predominantly engaged in activities that are in the business of banking, or in activities that are financial in nature, as defined in section 4(k) of the Bank Holding Company Act of 1956. See 7 U.S.C. 2(h)(7)(C)(i); 15 U.S.C. 78c–3(g)(3). 21 See 7 U.S.C. 2(h)(7)(C)(ii); 17 CFR 50.50; 77 FR 42560 (July 19, 2012); as recodified by 77 FR 74284 (Dec. 13, 2012). 22 See 15 U.S.C. 78c–3(g)(3)(B). E:\FR\FM\30NOR3.SGM 30NOR3 74920 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations requirements for the clearing exemption.23 Captive finance companies: Section 2(h)(7)(C) also provides that the definition of ‘‘financial entity’’ does not include an entity whose primary business is providing financing and uses derivatives for the purposes of hedging underlying commercial risks relating to interest rate and foreign exchange exposures, 90 percent or more of which arise from financing that facilitates the purchase or lease of products, 90 percent or more of which are manufactured by the parent company or another subsidiary of the parent company (‘‘captive finance company’’).24 These entities can avail themselves of a clearing exception when they are using swaps to hedge or mitigate commercial risk and thus would be eligible for the exemption in the Agencies’ margin rules pursuant to § l.1(d). B. Treasury Affiliates Acting as Agent asabaliauskas on DSK5VPTVN1PROD with RULES TRIPRA provides that the initial and variation margin requirements shall not apply to a non-cleared swap in which a counterparty satisfies the criteria in section 2(h)(7)(D) of the Commodity Exchange Act or section 3C(g)(4) of the Securities Exchange Act. These sections provide that, where a person qualifies for an exception from the clearing requirements, an affiliate of that person (including an affiliate predominantly engaged in providing financing for the purchase of the merchandise or manufactured goods of the person) may qualify for the exception as well, but only if the affiliate is acting on behalf of the person and as an agent and uses the swap to hedge or mitigate the commercial risk of the person or other affiliate of the person that is not a financial entity (‘‘treasury affiliate acting as agent’’).25 A treasury affiliate acting as agent that meets the requirements for a clearing exemption would also be eligible for an exemption pursuant to § l.1(d) from the Agencies’ joint final rule. 23 On December 21, 2010, the SEC proposed to exempt security-based swaps used by small depository institutions, small Farm Credit System institutions, and small credit unions with total assets of $10 billion or less from clearing. See 75 FR 79992 (December 21, 2010). 24 See 7 U.S.C. 2(h)(7)(C)(iii). 25 See 7 U.S.C. 2(h)(7)(D); 15 U.S.C. 78c–3(g)(4). This exception does not apply to a person that is a swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, an issuer that would be an investment company as defined in section 3 of the Investment Company Act of 1940 (15 U.S.C. 80a–3) but for section 3(c)(1) or 3(c)(7) of that Act, a commodity pool, or a bank holding company with over $50 billion in consolidated assets. VerDate Sep<11>2014 19:59 Nov 27, 2015 Jkt 238001 C. Certain Cooperative Entities TRIPRA provides that the initial and variation margin requirements shall not apply to a non-cleared swap in which a counterparty qualifies for an exemption issued under section 4(c)(1) of the Commodity Exchange Act from the clearing requirements of section 2(h)(1)(A) of the Commodity Exchange Act for cooperative entities as defined in such exemption.26 The CFTC, pursuant to its authority under section 4(c)(1) of the Commodity Exchange Act, adopted a regulation that allows cooperatives that are financial entities to elect an exemption from mandatory clearing of swaps that: (1) They enter into in connection with originating loans for their members; or (2) hedge or mitigate commercial risk related to loans to members or swaps with their members which are not financial entities or are exempt from the definition of financial entity.27 The swaps of these cooperatives that would qualify for an exemption from clearing also would qualify pursuant to § l.1(d) for an exemption from the margin requirements of the joint final rule. III. Request for Comments The Agencies request comment on all aspects of the interim final rule. IV. Administrative Law Matters A. Administrative Procedures Act Pursuant to the Administrative Procedure Act (the ‘‘APA’’), at 5 U.S.C. 553(b)(B), notice and comment are not required prior to the issuance of a final rule if an agency, for good cause, finds that ‘‘notice and public procedure thereon are impracticable, unnecessary, or contrary to the public interest.’’ As discussed above, this interim final rule implements Title III of TRIPRA. In section 303 of TRIPRA, Congress required that the Agencies implement the provisions of Title III by promulgating an interim final rule and seeking public comment on the interim final rule. Given the statutory requirement for an interim final rule, the Agencies find that prior notice and comment in accordance with 5 U.S.C. 553(b) is impracticable. The Agencies are providing, however, an opportunity for comment before the effective date of the interim final rule (April 1, 2016). 26 See 7 U.S.C. 6(c)(1). The CFTC, pursuant to its authority under section 4(c)(1) of the Commodity Exchange Act, adopted 17 CFR 50.51, which allows cooperative financial entities that meet certain qualifications to elect not to clear certain swaps that are otherwise required to be cleared pursuant to section 2(h)(1)(A) of the Commodity Exchange Act. 27 See 7 U.S.C. 6(c)(1);17 CFR 50.51. PO 00000 Frm 00006 Fmt 4701 Sfmt 4700 B. Solicitation of Comments on Use of Plain Language Section 722 of the Gramm-LeachBliley Act, Public Law 106–102, sec. 722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OCC, Board and FDIC to use plain language in all proposed and final rules published after January 1, 2000. The OCC, Board and FDIC invite your comments on how to make this proposal easier to understand. For example: • Have we organized the material to suit your needs? If not, how could this material be better organized? • Are the requirements in the regulation clearly stated? If not, how could the regulation be more clearly stated? • Does the regulation contain language or jargon that is not clear? If so, which language requires clarification? • Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand? • What else could we do to make the regulation easier to understand? C. Paperwork Reduction Act Analysis Certain provisions of the interim final rule contain ‘‘collection of information’’ requirements within the meaning of the Paperwork Reduction Act (PRA) of 1995 (44 U.S.C. 3501–3521). In accordance with the requirements of the PRA, the Agencies may not conduct or sponsor, and the respondent is not required to respond to, an information collection unless it displays a currently valid Office of Management and Budget (OMB) control number. The OMB control number for the OCC is 1557– 0251, the FDIC is 3064–0180, and the Board is 7100–0364. The information collection requirements contained in this joint notice of interim final rulemaking have been submitted to OMB for review and approval by the OCC and FDIC under section 3507(d) of the PRA and § 1320.11 of OMB’s implementing regulations (5 CFR part 1320). The Board reviewed the interim final rule under the authority delegated to the Board by OMB. The interim final rule contains requirements subject to the PRA. The reporting requirements are found in § l .1(d). The interim final rule implements statutory language that requires certain swaps of certain counterparties to qualify for a statutory exemption or exception from clearing in order to not be subject to the initial and variation margin requirements of the joint final rule. E:\FR\FM\30NOR3.SGM 30NOR3 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations Comments are invited on: (a) Whether the collections of information are necessary for the proper performance of the Agencies’ functions, including whether the information has practical utility; (b) The accuracy of the estimates of the burden of the information collections, including the validity of the methodology and assumptions used; (c) Ways to enhance the quality, utility, and clarity of the information to be collected; (d) Ways to minimize the burden of the information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and (e) Estimates of capital or start-up costs and costs of operation, maintenance, and purchase of services to provide information. All comments will become a matter of public record. Comments on aspects of this notice that may affect reporting or recordkeeping requirements and burden estimates should be sent to the addresses listed in the ADDRESSES section of this Supplementary Information. A copy of the comments may also be submitted to the OMB desk officer for the Agencies: By mail to U.S. Office of Management and Budget, 725 17th Street NW., #10235, Washington, DC 20503 or by facsimile to 202–395– 5806, Attention, Federal Banking Agency Desk Officer. asabaliauskas on DSK5VPTVN1PROD with RULES Proposed Information Collection Title of Information Collection: Reporting and Recordkeeping Requirements Associated with Margin and Capital Requirements for Covered Swap Entities. Frequency of Response: Annual, daily, and event-generated. Affected Public: The affected public of the OCC, FDIC, and Board is assigned generally in accordance with the entities covered by the scope and authority section of their respective interim final rule. Businesses or other for-profit. Respondents: OCC: Any national bank or a subsidiary thereof, Federal savings association or a subsidiary thereof, or Federal branch or agency of a foreign bank that is registered as a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant. FDIC: Any FDIC-insured statechartered bank that is not a member of the Federal Reserve System or FDICinsured state-chartered savings association that is registered as a swap dealer, major swap participant, security- VerDate Sep<11>2014 20:04 Nov 27, 2015 Jkt 238001 based swap dealer, or major securitybased swap participant. Board: Any state member bank (as defined in 12 CFR 208.2(g)), bank holding company (as defined in 12 U.S.C. 1841), savings and loan holding company (as defined in 12 U.S.C. 1467a), foreign banking organization (as defined in 12 CFR 211.21(o)), foreign bank that does not operate an insured branch, state branch or state agency of a foreign bank (as defined in 12 U.S.C. 3101(b)(11) and (12)), or Edge or agreement corporation (as defined in 12 CFR 211.1(c)(2) and (3)) that is registered as a swap dealer, major swap participant, security-based swap dealer, or major security-based swap participant. Abstract: This interim final rule implements Title III of the Terrorism Risk Insurance Program Reauthorization Act of 2015 (‘‘TRIPRA’’), which exempts from the Agencies’ swap margin rules non-cleared swaps and non-cleared security-based swaps in which a counterparty qualifies for an exemption or exception from clearing under the Dodd-Frank Act. This interim final rule is a companion rule to the final rules adopted by the Agencies to implement section 731 and 764 of the Dodd-Frank Act. Reporting Requirements The interim final rule implements statutory language that requires certain swaps of certain counterparties to qualify for a statutory exemption or exception from clearing in order to not be subject to the initial and variation margin requirements of the joint final rule. The reporting requirements are found in § l.1(d) pursuant to crossreferences to other statutory provisions that set forth the conditions for an exemption from clearing. For example, TRIPRA provides that the initial and variation margin requirements of the joint final rule shall not apply to a noncleared swap or non-cleared securitybased swap in which a counterparty qualifies for an exception under section 2(h)(7)(A) of the Commodity Exchange Act or section 3C(g)(1) of the Securities Exchange Act, which includes certain reporting requirements established by the applicable Commission.28 Certain other counterparties that are exempt from clearing pursuant to other provisions are also required to meet these reporting requirements to notify the respective Commissions.29 Thus, in 28 See, e.g., 17 CFR 50.50(b). example, certain exempt cooperatives must meet these reporting requirements to qualify for an exemption from clearing. See 17 CFR 50.51(c). Similarly, exempt treasury affiliates also must be an affiliate of a person that qualifies for an exception 29 For PO 00000 Frm 00007 Fmt 4701 Sfmt 4700 74921 certain cases, the statutory exemption from clearing requires a notification to the CFTC or SEC. These counterparties would be required to meet the same notification requirements that are required for an exception or exemption from clearing in order to qualify for an exception or exemption pursuant to § l.1(d) from the initial and variation margin requirements established by the Agencies under sections 731 and 764 of the Dodd-Frank Act. Since this interim final rule serves to implement exemptions and exceptions by reference to existing statutory provisions, § l.1(d) imposes new reporting requirements that are required under the relevant statutory provisions. Estimated Burden per Response: § l.1(d)—1 hour. OCC Number of respondents: 20. Proposed revisions only estimated annual burden: 20,000 hours. Total estimated annual burden: 34,780 hours. FDIC 30 Number of respondents: 1. Proposed revisions only estimated annual burden: 1,000 hours. Total estimated annual burden: 1,739 hours. Board Number of respondents: 50. Proposed revisions only estimated annual burden: 50,000 hours. Total estimated annual burden: 86,964 hours. FCA: The FCA has determined that the interim final rule does not involve a collection of information pursuant to the Paperwork Reduction Act for Farm Credit System institutions because Farm Credit System institutions are Federally chartered instrumentalities of the United States and instrumentalities of the United States are specifically excepted from the definition of ‘‘collection of information’’ contained in 44 U.S.C. 3502(3). FHFA: With respect to any regulated entity as defined in section 1303(20) of the Federal Housing Enterprises Financial Safety and Soundness Act of 1992, as amended (12 U.S.C. 4502(20)), from clearing that notifies the applicable Commission how it generally meets its financial obligations associated with entering into noncleared swaps. See 7 U.S.C. 2(h)(7)(D); 15 U.S.C. 78c–3(g)(4). 30 The FDIC had initially estimated that three of its institutions might register as a swap dealer, major swap participant, security-based swap dealer or major security-based swap participant but no state non-member bank nor any state savings association has so registered, so FDIC is reducing its estimate to one as a placeholder for its information collection. E:\FR\FM\30NOR3.SGM 30NOR3 74922 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations the interim final rule does not contain any collection of information that requires the approval of the OMB under the PRA. D. Regulatory Flexibility Act Analysis Board: The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) (‘‘RFA’’) 31 generally requires an agency that is issuing a proposed rule to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. The Board observes that the interim final rule would not have a significant economic impact on a substantial number of small entities. The Board requests comment on its conclusion that the new interim final rule should not have a significant economic impact on a substantial number of small entities. As explained in detail above, this interim final rule implements section 302 of TRIPRA, which provides that initial and variation margin requirements will not apply to specified non-cleared swaps or non-cleared security-based swaps of certain counterparties (to a covered swap entity). This interim final rule may have an effect on the following types of small entities: (i) Covered swap entities that are subject to the joint final rule’s capital and margin requirements; and (ii) certain counterparties (e.g., nonfinancial end users and certain other small financial counterparties) that engage in swap transactions with covered swap entities.32 Under Small Business Administration (the ‘‘SBA’’) regulations, the finance and insurance sector includes commercial banking, savings institutions, credit unions, other depository credit intermediation and credit card issuing entities (‘‘financial institutions’’), which generally are considered ‘‘small’’ if they have assets of $550 million or less.33 Covered swap entities would be considered financial institutions for purposes of the RFA in accordance with SBA regulations. The Board does not expect that any covered swap entity is 31 See 5 U.S.C. 601 et seq. Board notes that the RFA does not require the Board to consider the impact of the interim final rule, including its indirect economic effects, on small entities that are not subject to the requirements of the interim final rule. See e.g., In Mid-Tex Electric Cooperative v. FERC, 773 F.2d 327 (D.C. Cir. 1985); United Distribution Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996); Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855 (D.C. Cir. 2001). 33 See 13 CFR 121.201 (effective December 2, 2014); see also 13 CFR 121.103(a)(6) (noting factors that the SBA considers in determining whether an entity qualifies as a small business, including receipts, employees, and other measures of its domestic and foreign affiliates). asabaliauskas on DSK5VPTVN1PROD with RULES 32 The VerDate Sep<11>2014 19:59 Nov 27, 2015 Jkt 238001 likely to be a small financial institution, because a small financial institution is unlikely to engage in the level of swap activity that would require it to register as a swap dealer or major swap participant.34 None of the currently registered covered swap entities are small entities. The interim final rule would have an indirect effect on certain counterparties to non-cleared swaps and non-cleared security-based swaps. Many of these counterparties would be considered ‘‘small’’ under the SBA’s regulations.35 However, the effect of TRIPRA and the interim final rule will be to exempt many of the non-cleared swaps and non-cleared security-based swaps of these counterparties from the margin requirements of the Agencies’ joint final rule. As described above, this interim final rule implements statutory language that requires certain swaps of certain counterparties to qualify for a statutory exemption or exception from the applicable clearing requirements in order to not be subject to the initial and variation margin requirements of the joint final rule. The reporting requirements are found in § l.1(d) of this interim final rule pursuant to crossreferences to other statutory provisions that set forth the conditions for an exemption or exception from clearing. In certain cases, the statutory exemption from clearing and related regulations may require a counterparty to report information, such as how it meets its swaps obligations, to the CFTC or SEC. These counterparties would be required to meet the same notification requirements that are required for an exception or exemption from the relevant CFTC and SEC regulations. Other than this potential overlap of reporting obligations of this interim final rule and the relevant CFTC and SEC regulations, the Board is aware of 34 The CFTC has published a list of provisionally registered swap dealers (as of September 22, 2015) and provisionally registered major swap participants (as of March 1, 2013) that does not include any small financial institutions. See http:// www.cftc.gov/LawRegulation/DoddFrankAct/ registerswapdealer and http://www.cftc.gov/ LawRegulation/DoddFrankAct/ registermajorswappart. The SEC has not provided a similar list since it only recently adopted rules to provide for the registration of security-based swap dealers and major security-based swap participants. See 80 FR 48963 (August 14, 2015); 17 CFR parts 240 and 249. 35 See 13 CFR 121.201. In additional to small financial institutions with assets of $550 or less, swap counterparties could also include other small entities defined in regulations issued by the SBA, including firms within the ‘‘Securities, Commodity Contracts, and Other Financial Investments and Related Activities’’ sector with assets of $38.5 million or less and ‘‘Funds, Trusts and Other Financial Vehicles’’ with assets of $32.5 million or less. PO 00000 Frm 00008 Fmt 4701 Sfmt 4700 any other Federal rules that duplicate, overlap, or conflict with this interim final rule. In light of the exemptions provided for the non-cleared swaps and non-cleared security-based swaps of many small entities, the Board does not believe that the interim final rule would have a significant economic impact on a substantial number of small entity counterparties. Since this interim final rule is required by section 303 of TRIPRA, the Board does not believe that there are any significant alternatives to the rule which would accomplish the stated objectives of the applicable statute. However, the Agencies welcome comment on any significant alternatives that would minimize the impact of the rule on small entities. In light of the foregoing, the Board does not believe that this interim final rule would have a significant economic impact on a substantial number of small entities. FDIC: The RFA requires an agency, in connection with a notice of final rulemaking, to prepare a Final Regulatory Flexibility Act analysis describing the impact of the rule on small entities (defined by the SBA for purposes of the RFA to include banking entities with total assets of $550 million or less) or to certify that the final rule will not have a significant economic impact on a substantial number of small entities. Using SBA’s size standards, as of June 30, 2015, the FDIC supervised 3,357 small entities. The FDIC does not expect any small entity that it supervises is likely to be a covered swap entity because such entities are unlikely to engage in the level of swap activity that would require them to register as a swap entity. Because TRIPRA excludes noncleared swaps entered into for hedging purposes by a financial institution with total assets of $10 billion or less from the requirement of the final rule, the FDIC expects that when a covered swap entity transactions non-cleared swaps with a small entity supervised by the FDIC, and such swaps are used to hedge the small entity’s commercial risk, those swaps with not be subject to the final rule. The FDIC does not expect any small entity that it supervises will engage in non-cleared swaps for purposes other than hedging. Therefore, the FDIC does not believe that the interim final rule results in a significant economic impact on a substantial number of small entities under its supervisory jurisdiction. The FDIC certifies that the interim final rule does not have a significant economic impact on a substantial E:\FR\FM\30NOR3.SGM 30NOR3 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations number of small FDIC-supervised institutions. OCC: The Regulatory Flexibility Act (RFA) 36 generally requires an agency that is issuing a proposed rule to prepare and make available for public comment an initial regulatory flexibility analysis that describes the impact of the proposed rule on small entities. The RFA does not apply to a rulemaking where a general notice of proposed rulemaking is not required.37 For the reasons described above in the Supplementary Information, the OCC has determined that it is unnecessary to publish a notice of proposed rulemaking for this interim final rule. Accordingly, the RFA’s requirements relating to an initial and final regulatory flexibility analysis do not apply. FCA: Pursuant to section 605(b) of the Regulatory Flexibility Act, the FCA hereby certifies that the interim final rule will not have a significant economic impact on a substantial number of small entities. Each of the banks in the Farm Credit System, considered together with its affiliated associations, has assets and annual income in excess of the amounts that would qualify them as small entities. Nor does the Federal Agricultural Mortgage Corporation meet the definition of a ‘‘small entity.’’ Therefore, Farm Credit System institutions are not ‘‘small entities’’ as defined in the Regulatory Flexibility Act. FHFA: FHFA certifies that the interim final rule will not have a significant economic impact on a substantial number of small entities, since none of FHFA’s regulated entities come within the meaning of small entities as defined in the Regulatory Flexibility Act (see 5 U.S.C. 601(6)), and the interim final rule will not substantially affect any business that its regulated entities might conduct with such small entities. Common Text of the Interim Final Rule (All Agencies) The common text of the interim final rule appears below: § l.1 Authority, purpose, scope, exemptions and compliance dates. asabaliauskas on DSK5VPTVN1PROD with RULES * * * * * (d) Exemptions—(1) Swaps. The requirements of this part (except for § l.12) shall not apply to a non-cleared swap if the counterparty: (i) Qualifies for an exception from clearing under section 2(h)(7)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(7)(A)) and implementing regulations; 36 See 37 See 20:04 Nov 27, 2015 DEPARTMENT OF THE TREASURY Office of the Comptroller of the Currency 12 CFR Chapter I Authority and Issuance For the reasons set forth in the common preamble and under the authority of 12 U.S.C. 93a and 5412(b)(2)(B), the Office of the Comptroller of the Currency amends chapter I of title 12, Code of Federal Regulations, as follows: PART 45—MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES 1. The authority citation for part 45 continues to read as follows: ■ Authority: 7 U.S.C. 6s(e), 12 U.S.C. 1 et seq., 12 U.S.C. 93a, 161, 481, 1818, 3907, 3909, 5412(b)(2)(B), and 15 U.S.C. 78o-10(e). § 45.1 [Amended] 2. Section 45.1 is amended by adding paragraph (d) as set forth at the end of the Common Preamble. ■ BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM 12 CFR Chapter II [END OF COMMON TEXT] Authority and Issuance List of Subjects 12 CFR Part 45 For the reasons set forth in the the Board of Governors of the Federal Reserve System amends 12 CFR chapter II as follows: SUPPLEMENTARY INFORMATION, Administrative practice and procedure, Capital, Margin requirements, National Banks, Federal Savings Associations, Reporting and recordkeeping requirements, Risk. 12 CFR Part 237 Administrative practice and procedure, Banks and banking, Capital, Foreign banking, Holding companies, Margin requirements, Reporting and recordkeeping requirements, Risk. PART 237—SWAPS MARGIN AND SWAPS PUSH-OUT Subpart A—Margin and Capital Requirements for Covered Swap Entities (Regulation KK) 3. The authority citation for subpart A of part 237 continues to read as follows: ■ 12 CFR Part 349 Administrative practice and procedure, Banks, Holding companies, Capital, Margin Requirements, Reporting and recordkeeping requirements, Savings associations Risk. Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o10(e), 12 U.S.C. 221 et seq., 12 U.S.C. 1818, 12 U.S.C. 1841 et seq., 12 U.S.C. 3101 et seq., 12 U.S.C. 1461 et seq. § 237.1 12 CFR Part 624 Accounting, Agriculture, Banks, Banking, Capital, Cooperatives, Credit, Margin requirements, Reporting and recordkeeping requirements, Risk, Rural areas, Swaps. [Amended] 4. Section 237.1 is amended by: a. Adding paragraph (d) as set forth at the end of the Common Preamble; and ■ b. Removing ‘‘part’’ wherever it appears in paragraph (d) and adding in its place ‘‘subpart.’’ ■ ■ FEDERAL DEPOSIT INSURANCE CORPORATION 12 CFR Chapter III Jkt 238001 12 CFR Part 1221 Authority and Issuance Government-sponsored enterprises, Mortgages, Securities. 5 U.S.C. 601 et seq. 5 U.S.C. 603 and 604. VerDate Sep<11>2014 (ii) Qualifies for an exemption from clearing under a rule, regulation, or order that the Commodity Futures Trading Commission issued pursuant to its authority under section 4(c)(1) of the Commodity Exchange Act of 1936 (7 U.S.C. 6(c)(1)) concerning cooperative entities that would otherwise be subject to the requirements of section 2(h)(1)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(1)(A)); or (iii) Satisfies the criteria in section 2(h)(7)(D) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(7)(D)) and implementing regulations. (2) Security-based swaps. The requirements of this part (except for § l.12) shall not apply to a non-cleared security-based swap if the counterparty: (i) Qualifies for an exception from clearing under section 3C(g)(1) of the Securities Exchange Act of 1934 (15 U.S.C. 78c–3(g)(1)) and implementing regulations; or (ii) Satisfies the criteria in section 3C(g)(4) of the Securities Exchange Act of 1934 (15 U.S.C. 78c–3(g)(4)) and implementing regulations. * * * * * 74923 SUPPLEMENTARY INFORMATION, PO 00000 Frm 00009 Fmt 4701 Sfmt 4700 For the reasons set forth in the the E:\FR\FM\30NOR3.SGM 30NOR3 74924 Federal Register / Vol. 80, No. 229 / Monday, November 30, 2015 / Rules and Regulations PART 349—DERIVATIVES Subpart A—Margin and Capital Requirements for Covered Swap Entities Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o– 10(e), and secs. 4.3, 5.9, 5.17, and 8.32 of the Farm Credit Act (12 U.S.C. 2154, 12 U.S.C. 2243, 12 U.S.C. 2252, and 12 U.S.C. 2279bb– 1). § 1221.1 § 624.1 Federal Deposit Insurance Corporation amends 12 CFR chapter III as follows: CHAPTER XII—FEDERAL HOUSING FINANCE AGENCY Dated: October 22, 2015. Thomas J. Curry, Comptroller of the Currency. By order of the Board of Governors of the Federal Reserve System, November 4, 2015. Robert deV. Frierson, Secretary of the Board. Dated at Washington, DC, this 22nd of October 2015. By order of the Board of Directors. Federal Deposit Insurance Corporation. Valerie J. Best, Assistant Executive Secretary. Dated: October 21, 2015. Dale L. Aultman, Secretary, Farm Credit Administration Board. Dated: October 28, 2015. Melvin L. Watt, Director, Federal Housing Finance Agency. SUBCHAPTER B—ENTITY REGULATIONS [FR Doc. 2015–28670 Filed 11–27–15; 8:45 am] [Amended] 5. The authority citation for subpart A of part 349 continues to read as follows: 8. Section 624.1 is amended by adding paragraph (d) as set forth at the end of the Common Preamble. Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o– 10(e), and 12 U.S.C. 1818 and 12 U.S.C. 1819(a)(Tenth), 12 U.S.C.1813(q), 1818, 1819, and 3108. FEDERAL HOUSING FINANCE AGENCY § 349.1 For the reasons set forth in the and under the authority of 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), 12 U.S.C. 4513 and 12 U.S.C. 4526, the Federal Housing Finance Agency is amending part 1221 of subchapter B of chapter XII of title 12 of the Code of Federal Regulations as follows: ■ ■ [Amended] 6. Section 349.1 is amended by: a. Adding paragraph (d) as set forth at the end of the Common Preamble. ■ b. Removing ‘‘part’’ wherever it appears in paragraph (d) and adding in its place ‘‘subpart’’. ■ ■ FARM CREDIT ADMINISTRATION 12 CFR Chapter VI Authority and Issuance For the reasons set forth in the SUPPLEMENTARY INFORMATION, the Farm Credit Administration is amending part 624 to chapter VI of title 12, Code of Federal Regulations, as follows: Authority and Issuance SUPPLEMENTARY INFORMATION, PART 1221—MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES PART 624—MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES BILLING CODE 4810–33–P; 6210–01–P; 6714–01–P; 6705–01–P; 8070–01–P Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o– 10(e), 12 U.S.C. 4513 and 12 U.S.C. 4526(a). ■ asabaliauskas on DSK5VPTVN1PROD with RULES 10. Section 1221.1 is amended by adding paragraph (d) as set forth at the end of the Common Preamble. ■ ■ 7. The authority citation for part 624 continues to read as follows: [Amended] VerDate Sep<11>2014 19:59 Nov 27, 2015 Jkt 238001 9. The authority citation for part 1221 continues to read as follows: PO 00000 Frm 00010 Fmt 4701 Sfmt 9990 E:\FR\FM\30NOR3.SGM 30NOR3

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[Federal Register Volume 80, Number 229 (Monday, November 30, 2015)]
[Rules and Regulations]
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Margin and Capital Requirements for Covered Swap Entities; Interim 
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12 CFR Part 237

[Docket No. R-1415]
RIN 7100-AD74

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Part 349

RIN 3064-AE21

FARM CREDIT ADMINISTRATION

12 CFR Part 624

RIN 3052-AC69

FEDERAL HOUSING FINANCE AGENCY

12 CFR Part 1221

RIN 2590-AA45


Margin and Capital Requirements for Covered Swap Entities

AGENCY: Office of the Comptroller of the Currency, Treasury (``OCC''); 
Board of Governors of the Federal Reserve System (``Board''); Federal 
Deposit Insurance Corporation (``FDIC''); Farm Credit Administration 
(``FCA''); and the Federal Housing Finance Agency (``FHFA'').

ACTION: Interim final rule and request for comment.

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SUMMARY: The OCC, Board, FDIC, FCA, and FHFA (each an ``Agency'' and, 
collectively, the ``Agencies'') are adopting and invite comment on an 
interim final rule that will exempt certain non-cleared swaps and non-
cleared security-based swaps with certain counterparties that qualify 
for an exception or exemption from clearing from the initial and 
variation margin requirements promulgated under sections 731 and 764 of 
the Dodd-Frank Wall Street Reform and Consumer Protection Act (the 
``Dodd-Frank Act'' or the ``Act''). This interim final rule implements 
Title III of the Terrorism Risk Insurance Program Reauthorization Act 
of 2015 (``TRIPRA''), which exempts from the Agencies' swap margin 
rules non-cleared swaps and non-cleared security-based swaps in which a 
counterparty qualifies for an exemption or exception from clearing 
under the Dodd-Frank Act. This interim final rule is a companion rule 
to the final rules adopted by the Agencies to implement section 731 and 
764 of the Dodd-Frank Act.

DATES: The interim final rule is effective April 1, 2016. Comments 
should be received on or before January 31, 2016.

ADDRESSES: Interested parties are encouraged to submit written comments 
jointly to all of the Agencies. Commenters are encouraged to use the 
title ``Margin and Capital Requirements for Covered Swap Entities'' to 
facilitate the organization and distribution of comments among the 
Agencies.
    Office of the Comptroller of the Currency. Because paper mail in 
the Washington, DC area and at the OCC is subject to delay, commenters 
are encouraged to submit comments by the Federal eRulemaking Portal or 
email, if possible. Please use the title ``Margin and Capital 
Requirements for Covered Swap Entities'' to facilitate the organization 
and distribution of the comments. You may submit comments by any of the 
following methods:
     Federal eRulemaking Portal--``regulations.gov'': Go to 
http://www.regulations.gov. Enter ``Docket ID OCC-2015-0023'' in the 
Search Box and click ``Search''. Results can be filtered using the 
filtering tools on the left side of the screen. Click on ``Comment 
Now'' to submit public comments.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
submitting public comments.
     Email: regs.comments@occ.treas.gov.
     Mail: Legislative and Regulatory Activities Division, 
Office of the Comptroller of the Currency, 400 7th Street SW., Suite 
3E-218, Mail Stop 9W-11, Washington, DC 20219.
     Hand Delivery/Courier: 400 7th Street SW., Suite 3E-218, 
Mail Stop 9W-11, Washington, DC 20219.
     Fax: (571) 465-4326.
    Instructions: You must include ``OCC'' as the agency name and 
``Docket ID OCC-2015-0023'' in your comment. In general, OCC will enter 
all comments received into the docket and publish them on the 
Regulations.gov Web site without change, including any business or 
personal information that you provide such as name and address 
information, email addresses, or phone numbers. Comments received, 
including attachments and other supporting materials, are part of the 
public record and subject to public disclosure. Do not enclose any 
information in your comment or supporting materials that you consider 
confidential or inappropriate for public disclosure.
    You may review comments and other related materials that pertain to 
this rulemaking action by any of the following methods:
     Viewing Comments Electronically: Go to http://www.regulations.gov. Enter ``Docket ID OCC -2015-0023'' in the Search 
box and click ``Search''. Comments can be filtered by Agency using the 
filtering tools on the left side of the screen.
     Click on the ``Help'' tab on the Regulations.gov home page 
to get information on using Regulations.gov, including instructions for 
viewing public comments, viewing other supporting and related 
materials, and viewing the docket after the close of the comment 
period.
     Viewing Comments Personally: You may personally inspect 
and photocopy comments at the OCC, 400 7th Street SW., Washington, DC. 
For security reasons, the OCC requires that visitors make an 
appointment to inspect comments. You may do so by calling (202) 649-
6700. Upon arrival, visitors will be required to present valid 
government-issued photo identification and to submit to a security 
screening in order to inspect and photocopy comments.
     Docket: You may also view or request available background 
documents and project summaries using the methods described above.
    Board of Governors of the Federal Reserve System: You may submit 
comments, identified by Docket No. R-1415 and RIN 7100-AD74, by any of 
the following methods:
     Agency Web site: http://www.federalreserve.gov. Follow the 
instructions for submitting comments at http://www.federalreserve.gov/apps/foia/proposedregs.aspx.
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Email: regs.comments@federalreserve.gov. Include the 
docket number in the subject line of the message.
     Fax: (202) 452-3819 or (202) 452-3102.
     Mail: Address to Robert deV. Frierson, Secretary, Board of 
Governors of the Federal Reserve System, 20th Street and Constitution 
Avenue NW., Washington, DC 20551.
    All public comments will be made available on the Board's Web site 
at http://www.federalreserve.gov/apps/foia/proposedregs.aspx as 
submitted,

[[Page 74917]]

unless modified for technical reasons. Accordingly, comments will not 
be edited to remove any identifying or contact information. Public 
comments may also be viewed electronically or in paper form in Room 
3515, 1801 K Street NW. (between 18th and 19th Street NW.), Washington, 
DC 20006 between 9:00 a.m. and 5:00 p.m. on weekdays.
    Federal Deposit Insurance Corporation: You may submit comments, 
identified by RIN 3064-AE21, by any of the following methods:
     Agency Web site: http://www.fdic.gov/regulations/laws/federal/. Follow instructions for submitting comments on the Agency Web 
site.
     Email: Comments@FDIC.gov. Include RIN 3064-AE21 on the 
subject line of the message.
     Mail: Robert E. Feldman, Executive Secretary, Attention: 
Comments, Federal Deposit Insurance Corporation, 550 17th Street NW., 
Washington, DC 20429.
     Hand Delivery: Comments may be hand delivered to the guard 
station at the rear of the 550 17th Street Building (located on F 
Street) on business days between 7:00 a.m. and 5:00 p.m.
    Instructions: All comments received must include the agency name 
and RIN for this rulemaking and will be posted without change to 
https://www.fdic.gov/regulations/laws/federal/, including any personal 
information provided.
    Federal Housing Finance Agency: You may submit your written 
comments on the interim final rulemaking, identified by regulatory 
information number: RIN 2590-AA45, by any of the following methods:
     Agency Web site: www.fhfa.gov/open-for-comment-or-input
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments. If you submit your 
comment to the Federal eRulemaking Portal, please also send it by email 
to FHFA at RegComments@fhfa.gov to ensure timely receipt by the Agency. 
Please include ``RIN 2590-AA45'' in the subject line of the message.
     Hand Delivery/Courier: The hand delivery address is: 
Alfred M. Pollard, General Counsel, Attention: Comments/RIN 2590-AA45, 
Federal Housing Finance Agency, Constitution Center (OGC Eighth Floor), 
400 7th St. SW., Washington, DC 20219. Deliver the package to the 
Seventh Street entrance Guard Desk, First Floor, on business days 
between 9:00 a.m. and 5:00 p.m.
     U.S. Mail, United Parcel Service, Federal Express, or 
Other Mail Service: The mailing address for comments is: Alfred M. 
Pollard, General Counsel, Attention: Comments/RIN 2590-AA45, Federal 
Housing Finance Agency, Constitution Center (OGC Eighth Floor), 400 7th 
St. SW., Washington, DC 20219.
    All comments received by the deadline will be posted for public 
inspection without change, including any personal information you 
provide, such as your name, address, email address and telephone number 
on the FHFA Web site at http://www.fhfa.gov. Copies of all comments 
timely received will be available for public inspection and copying at 
the address above on government-business days between the hours of 10 
a.m. and 3 p.m. To make an appointment to inspect comments please call 
the Office of General Counsel at (202) 649-3804.
    Farm Credit Administration: We offer a variety of methods for you 
to submit your comments. For accuracy and efficiency reasons, 
commenters are encouraged to submit comments by email or through the 
FCA's Web site. As facsimiles (fax) are difficult for us to process and 
achieve compliance with section 508 of the Rehabilitation Act, we are 
no longer accepting comments submitted by fax. Regardless of the method 
you use, please do not submit your comments multiple times via 
different methods. You may submit comments by any of the following 
methods:
     Email: Send us an email at reg-comm@fca.gov.
     FCA Web site: http://www.fca.gov. Select ``Law & 
Regulation,'' then ``FCA Regulations,'' then ``Public Comments,'' then 
follow the directions for ``Submitting a Comment.''
     Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.
     Mail: Barry F. Mardock, Deputy Director, Office of 
Regulatory Policy, Farm Credit Administration, 1501 Farm Credit Drive, 
McLean, VA 22102-5090.
    You may review copies of all comments we receive at our office in 
McLean, Virginia or on our Web site at http://www.fca.gov. Once you are 
in the Web site, select ``Law & Regulation,'' then ``FCA Regulations,'' 
then ``Public Comments,'' and follow the directions for ``Reading 
Submitted Public Comments.'' We will show your comments as submitted, 
including any supporting data provided, but for technical reasons we 
may omit items such as logos and special characters. Identifying 
information that you provide, such as phone numbers and addresses, will 
be publicly available. However, we will attempt to remove email 
addresses to help reduce Internet spam.

FOR FURTHER INFORMATION CONTACT: OCC: Kurt Wilhelm, Director, Financial 
Markets Group, (202) 649-6437, or Carl Kaminski, Special Counsel, 
Legislative and Regulatory Activities Division, (202) 649-5490, for 
persons who are deaf or hard of hearing, TTY (202) 649-5597, Office of 
the Comptroller of the Currency, 400 7th Street SW., Washington, DC 
20219.
    Board: Sean D. Campbell, Associate Director, (202) 452-3760, or 
Elizabeth MacDonald, Manager, Division of Banking Supervision and 
Regulation, (202) 475-6316; Anna M. Harrington, Counsel, (202) 452-
6406, or Victoria M. Szybillo, Counsel, Legal Division, (202) 475-6325, 
Board of Governors of the Federal Reserve System, 20th and C Streets 
NW., Washington, DC 20551.
    FDIC: Bobby R. Bean, Associate Director, Capital Markets Branch, 
bbean@fdic.gov, Jacob Doyle, Capital Markets Policy Analyst, 
jdoyle@fdic.gov, Division of Risk Management Supervision, (202) 898-
6888; Thomas F. Hearn, Counsel, thohearn@fdic.gov, or Catherine 
Topping, Counsel, ctopping@fdic.gov, Legal Division, Federal Deposit 
Insurance Corporation, 550 17th Street NW., Washington, DC 20429.
    FCA: J.C. Floyd, Associate Director, Finance & Capital Market Team, 
Timothy T. Nerdahl, Senior Policy Analyst--Capital Markets, Jeremy R. 
Edelstein, Senior Policy Analyst, Office of Regulatory Policy, (703) 
883-4414, TTY (703) 883-4056, or Richard A. Katz, Senior Counsel, 
Office of General Counsel, (703) 883-4020, TTY (703) 883-4056, Farm 
Credit Administration, 1501 Farm Credit Drive, McLean, VA 22102-5090.
    FHFA: Robert Collender, Principal Policy Analyst, Office of Policy 
Analysis and Research, (202) 649-3196, Robert.Collender@fhfa.gov, or 
Peggy K. Balsawer, Associate General Counsel, Office of General 
Counsel, (202) 649-3060, Peggy.Balsawer@fhfa.gov, Federal Housing 
Finance Agency, Constitution Center, 400 7th St. SW., Washington, DC 
20219. The telephone number for the Telecommunications Device for the 
Hearing Impaired is (800) 877-8339.

SUPPLEMENTARY INFORMATION:

I. Background

    The Dodd-Frank Act was enacted on July 21, 2010.\1\ Title VII of 
the Dodd-Frank Act established a comprehensive new regulatory framework 
for derivatives, which the Act generally characterizes as ``swaps'' and 
``security-based swaps.'' \2\ As part of this new

[[Page 74918]]

regulatory framework, sections 731 and 764 of the Dodd-Frank Act added, 
respectively, a new section 4s to the Commodity Exchange Act of 1936 
(the ``Commodity Exchange Act''), and a new section 15F to the 
Securities Exchange Act of 1934 (the ``Securities Exchange Act''), 
which require registration with the U.S. Commodity Futures Trading 
Commission (``CFTC'') of swap dealers and major swap participants and 
with the U.S. Securities and Exchange Commission (the ``SEC'') of 
security-based swap dealers and major security-based swap 
participants.\3\ These registrants are collectively referred to in this 
preamble as ``swap entities.''
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    \1\ Public Law 111-203, 124 Stat. 1376 (2010).
    \2\ ``Swaps'' are defined in section 721 of the Dodd-Frank Act 
to include interest rate swaps, commodity-based swaps, equity swaps 
and credit default swaps, and ``security-based swaps'' are defined 
in section 761 of the Dodd-Frank Act to include a swap based on a 
single security or loan or on a narrow-based security index. See 7 
U.S.C. 1a(47); 15 U.S.C. 78c(a)(68).
    \3\ See 7 U.S.C. 6s; 15 U.S.C. 78o-10. Section 731 of the Dodd-
Frank Act requires swap dealers and major swap participants to 
register with the CFTC, which is vested with primary responsibility 
for the oversight of the swaps market under Title VII of the Dodd-
Frank Act. Section 764 of the Dodd-Frank Act requires security-based 
swap dealers and major security-based swap participants to register 
with the SEC, which is vested with primary responsibility for the 
oversight of the security-based swaps market under Title VII of the 
Dodd-Frank Act. Section 712(d)(1) of the Dodd-Frank Act requires the 
CFTC and SEC to issue joint rules further defining the terms swap, 
security-based swap, swap dealer, major swap participant, security-
based swap dealer, and major security-based swap participant. The 
CFTC and SEC issued final joint rulemakings with respect to these 
definitions in May 2012 and August 2012, respectively. See 77 FR 
30596 (May 23, 2012); 77 FR 39626 (July 5, 2012) (correction of 
footnote in the Supplementary Information accompanying the rule); 
and 77 FR 48207 (August 13, 2012). 17 CFR part 1; 17 CFR parts 230, 
240 and 241.
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    Sections 731 and 764 of the Dodd-Frank Act require the Agencies to 
adopt joint rules that apply to all swap entities for which any one of 
the Agencies is the prudential regulator,\4\ imposing capital 
requirements and initial and variation margin requirements on all swaps 
and security-based swaps not cleared by a registered derivatives 
clearing organization or clearing agency (``non-cleared swaps'').\5\ 
The Agencies initially proposed a joint rule to implement the capital 
and margin requirements of sections 731 and 764 on May 11, 2011 \6\ and 
re-proposed the rule on September 24, 2014 \7\ in light of the comments 
received by the Agencies on the original proposal and subsequent 
recommendations regarding the international framework for margin 
requirements on non-cleared derivatives finalized by the Basel 
Committee on Banking Supervisions (``BCBS'') and the Board of the 
International Organization of Securities Commissions (``IOSCO'') in 
September 2013.\8\ In a separate action, the Agencies have adopted a 
joint final rule to implement these Dodd-Frank Act requirements (the 
``joint final rule'').
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    \4\ Section 1a(39) of the Commodity Exchange Act defines the 
term ``prudential regulator'' for purposes of the capital and margin 
requirements applicable to swap dealers, major swap participants, 
security-based swap dealers and major security-based swap 
participants. 7 U.S.C. 1a(39).
    \5\ See 7 U.S.C. 6s(e)(2)(A); 15 U.S.C. 78o-10(e)(2)(A).
    \6\ 76 FR 27564 (May 11, 2011).
    \7\ 79 FR 57348 (September 24, 2014).
    \8\ See BCBS and IOSCO ``Margin requirements for non-centrally 
cleared derivatives,'' (September 2013), available at https://www.bis.org/publ/bcbs261.pdf.
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    The capital and margin requirements under sections 731 and 764 of 
the Dodd-Frank Act apply to non-cleared swaps and complement other 
provisions of the Dodd-Frank Act that require the CFTC and SEC to make 
determinations as to whether certain swaps or security-based swaps, or 
a group, category, or class of such transactions, should be required to 
be cleared.\9\ If the CFTC or SEC has made such a determination, it is 
generally unlawful for any person to engage in such a swap or security-
based swap unless the transaction is submitted to a derivatives 
clearing organization or clearing agency, as applicable, for clearing.
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    \9\ 7 U.S.C. 2(h); 15 U.S.C. 78c-3. The Commodity Exchange Act 
and the Securities Exchange Act set out standards that the CFTC and 
the SEC are required to apply when making determinations about 
clearing, which generally address whether a swap or security-based 
swap is sufficiently standardized to be cleared. 7 U.S.C. 
2(h)(2)(D); 15 U.S.C. 78c-3(b)(4). To date, the CFTC has determined 
that certain interest rate swaps and credit default swaps are 
required to be cleared. 17 CFR 50.4.
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    The clearing requirements, however, do not apply to an entity that 
is not a financial entity, is using a swap or security-based swap to 
hedge or mitigate commercial risk, and notifies the applicable 
Commission, in a manner set forth by that Commission, how it generally 
meets its financial obligations.\10\ Thus, a particular swap or 
security-based swap might be subject to the capital and margin 
requirements of section 731 and 764 either because it is not subject to 
the mandatory clearing requirement, or because one of the parties to 
the swap is eligible for, and elects to use, an exception or exemption 
from the mandatory clearing requirement. Such a swap is a ``non-
cleared'' swap for purposes of the capital and margin requirements 
established under sections 731 and 764 of the Dodd-Frank Act.
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    \10\ See 7 U.S.C. 2(h)(7); 15 U.S.C. 78c-3(g). Further, the CFTC 
has authority to exempt swaps from the clearing requirement. 7 
U.S.C. 6(c)(1).
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    Sections 731 and 764 direct the Agencies to impose initial and 
variation margin requirements on all swaps that are not cleared. Under 
the proposed rule, the Agencies distinguished among different types of 
counterparties on the basis of risk,\11\ and the Agencies addressed 
swaps for certain ``other counterparties'' including commercial end 
users by providing that a covered swap entity's collection of margin 
from them was subject to the judgment of the covered swap entity. In 
particular, a covered swap entity was not required to collect initial 
and variation margin from these ``other counterparties'' as a matter of 
course; a covered swap entity was allowed to collect initial or 
variation margin at such times and in such forms and amounts (if any) 
as the covered swap entity determines appropriate in its overall credit 
risk management of the covered swap entity's exposure to the 
customer.\12\
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    \11\ The joint final rule takes a similar approach. In 
implementing this risk-based approach, the final rule distinguishes 
among four separate types of swap counterparties: (i) Counterparties 
that are themselves swap entities; (ii) counterparties that are 
financial end users with a material swaps exposure; (iii) 
counterparties that are financial end users without a material swaps 
exposure, and (iv) other counterparties, including nonfinancial end 
users, sovereigns, and multilateral development banks.
    \12\ See Sec. Sec.  _.3(d) and _.4(c) of the proposed rule.
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    On January 12, 2015, President Obama signed into law TRIPRA.\13\ 
Title III of TRIPRA, the ``Business Risk Mitigation and Price 
Stabilization Act of 2015,'' amends the statutory provisions added by 
the Dodd-Frank Act relating to margin requirements for non-cleared 
swaps and non-cleared security-based swaps. Specifically, section 302 
of TRIPRA's Title III amends sections 731 and 764 of the Dodd-Frank Act 
to provide that the initial and variation margin requirements do not 
apply to certain transactions of specified counterparties that would 
qualify for an exemption or exception from clearing, as explained more 
fully below. Non-cleared swaps and non-cleared security-based swaps 
that are exempt under section 302 of TRIPRA will not be subject to the 
Agencies' rules implementing margin requirements. In section 303 of 
TRIPRA, Congress required that the Agencies implement the provisions of 
Title III by promulgating an interim final rule and seeking public 
comment on the interim final rule.\14\
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    \13\ Public Law 114-1, 129 Stat. 3 (2015).
    \14\ Section 303 requires that ``[t]he amendments made by this 
title to the Commodity Exchange Act shall be implemented . . . 
through the promulgation of an interim final rule . . .'' The 
Agencies are interpreting this provision to apply to the amendments 
made by TRIPRA to the Securities Exchange Act as well.
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    The Agencies are therefore promulgating this interim final rule 
with request for comment. The proposed rule of September 2014 would 
have allowed covered swap entities to

[[Page 74919]]

collect initial or variation margin from certain ``other 
counterparties,'' at their discretion. Additionally, covered swap 
entities would have been required to exchange variation margin with all 
financial end users, and initial margin with financial end users with 
material swap exposure. The effect of the interim final rule is to 
grant an exception from the margin requirements of the joint final rule 
for non-cleared swaps meeting certain criteria that covered swap 
entities enter into with certain ``other counterparties'' and certain 
financial end users.\15\
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    \15\ The joint final rule also contains provisions allowing a 
covered swap entity to continue with the current practice of 
collecting initial or variation margin at such times and in such 
forms and amounts (if any) as the covered swap entity determines 
appropriate in its overall credit risk management of the swap 
entity's exposure to the customer for ``other counterparties.'' The 
TRIPRA exemptions are transaction-based, as opposed to counterparty-
based. For example, if a commercial end user enters into a non-
cleared swap with a covered swap entity and the transaction does not 
qualify for an exception or exemption as described below, then the 
covered swap entity would treat the swap in accordance with the 
``other counterparties'' provisions in Sec. Sec.  _.3 and _.4 of the 
joint final rule. See Sec. Sec.  _.3(d) and _.4(c) of the joint 
final rule.
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    As noted above, swaps may be non-cleared swaps either because (i) 
there is an exemption or exception from clearing available; or (ii) the 
CFTC or SEC, as applicable, has not determined that such swap or 
security-based swap is required to be cleared. The exclusions and 
exemptions from the joint final margin rule described below will apply 
to both categories of non-cleared swaps when they involve a 
counterparty that meets the requirements for an exception or exemption 
from clearing (e.g., a non-financial end user using swaps to hedge or 
mitigate commercial risk).
    Clearing requirements pursuant to the Commodity Exchange Act began 
to take effect with respect to certain interest rate and credit default 
swap indices swaps on March 11, 2013.\16\ Covered swap entities have 
accordingly already established methods and procedures to engage in 
transactions with counterparties that are eligible for the clearing 
exceptions or exemptions and for recording and reporting the 
eligibility of these transactions for the exception or exemptions as 
required under the statute.\17\ The Agencies expect these processes 
will function equally well as a basis for the parallel statutory 
exemptions from initial and variation margin requirements for non-
cleared swaps implemented pursuant to this interim final rule.
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    \16\ 17 CFR 50.25. See 77 FR 44441 (July 30, 2012).
    \17\ See, e.g., 17 CFR 50.50(b).
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II. Description of the Interim Final Rule

    This interim final rule, which adds a new Sec.  _.1(d) to the joint 
final rule, adopts the statutory exemptions and exceptions as required 
under TRIPRA. TRIPRA provides that the initial and variation margin 
requirements do not apply to the non-cleared swaps and non-cleared 
security-based swaps of three categories of counterparties. In 
particular, section 302 of TRIPRA amends sections 731 and 764 so that 
initial and variation margin requirements will not apply to a swap or 
security-based swap in which a counterparty (to a covered swap entity) 
is:

    (1) A non-financial entity (including small financial 
institution and a captive finance company) that qualifies for the 
clearing exception under section 2(h)(7)(A) of the Commodity 
Exchange Act or section 3C(g)(1) of the Securities Exchange Act;
    (2) A cooperative entity that qualifies for an exemption from 
the clearing requirements issued under section 4(c)(1) of the 
Commodity Exchange Act; or
    (3) A treasury affiliate acting as agent that satisfies the 
criteria for an exception from clearing in section 2(h)(7)(D) of the 
Commodity Exchange Act or section 3C(g)(4) of the Securities 
Exchange Act.

A. Non-Financial Entities

    TRIPRA provides that the initial and variation margin requirements 
of the joint final rule shall not apply to a non-cleared swap in which 
a counterparty qualifies for an exception under section 2(h)(7)(A) of 
the Commodity Exchange Act or section 3C(g)(1) of the Securities 
Exchange Act.\18\ Section 2(h)(7)(A) and section 3C(g)(1) except from 
clearing swaps where one of the counterparties is not a financial 
entity, is using the swap to hedge or mitigate commercial risk, and 
notifies the CFTC or SEC how it generally meets its financial 
obligations associated with entering into non-cleared swaps. A number 
of different types of counterparties may qualify for an exception from 
clearing under section 2(h)(7)(A) and section 3C(g)(1), including: non-
financial end users, small banks, savings associations, Farm Credit 
System institutions, and credit unions. In addition, captive finance 
companies qualify for an exception from clearing under section 
2(h)(7)(A).\19\
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    \18\ See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c-3(g)(1).
    \19\ There is no corresponding exclusion under section 3C(g)(1) 
of the Securities Exchange Act for captive finance companies, likely 
because these entities generally do not engage in security-based 
swaps.
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    Non-financial end users: A counterparty that is not a financial 
entity \20\ (sometimes referred to as ``non-financial end users'' or 
``commercial end users'') that is using swaps to hedge or mitigate 
commercial risk generally would qualify for an exception from clearing 
under section 2(h)(7)(A) or section 3C(g)(1) and thus from the 
requirements of the joint final rule for non-cleared swaps and non-
cleared security-based swaps pursuant to Sec.  _.1(d).
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    \20\ See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c-3(g)(1); 17 CFR 
50.50. A ``financial entity'' is defined to mean (i) a swap dealer; 
(ii) a security-based swap dealer; (iii) a major swap participant; 
(iv) a major security-based swap participant; (v) a commodity pool; 
(vi) a private fund as defined in section 202(a) of the Investment 
Advisers Act of 1940; (vii) an employee benefit plan as defined in 
sections 3(3) and 3(32) of the Employment Retirement Income Security 
Act of 1974; (viii) a person predominantly engaged in activities 
that are in the business of banking, or in activities that are 
financial in nature, as defined in section 4(k) of the Bank Holding 
Company Act of 1956. See 7 U.S.C. 2(h)(7)(C)(i); 15 U.S.C. 78c-
3(g)(3).
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    Small banks, savings associations, Farm Credit System institutions, 
and credit unions: The definition of ``financial entity'' in section 
2(h)(7)(C)(ii) provides that the CFTC shall consider whether to exempt 
small banks, savings associations, Farm Credit System institutions, and 
credit unions with total assets of $10 billion or less. Pursuant to 
this authority, the CFTC has exempted small banks, savings 
associations, Farm Credit System institutions, and credit unions with 
total assets of $10 billion or less from the definition of ``financial 
entity,'' thereby permitting these institutions to avail themselves of 
the clearing exception when they are using swaps to hedge or mitigate 
risk.\21\ As a result, these small financial institutions that are 
using non-cleared swaps to hedge or mitigate commercial risk would also 
qualify for an exemption from the initial and variation margin 
requirements of the joint final rule pursuant to Sec.  _.1(d).
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    \21\ See 7 U.S.C. 2(h)(7)(C)(ii); 17 CFR 50.50; 77 FR 42560 
(July 19, 2012); as recodified by 77 FR 74284 (Dec. 13, 2012).
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    Similarly, section 3C(g) provides that the SEC shall consider 
whether to exempt small banks, savings associations, Farm Credit System 
institutions, and credit unions with total assets of $10 billion or 
less.\22\ If the SEC were to implement an exclusion for such entities 
from clearing, non-cleared security-based swaps with those entities 
would be eligible for the exemption in the Agencies' margin rules 
pursuant to Sec.  _.1(d) as required under TRIPRA, provided they met 
the other

[[Page 74920]]

requirements for the clearing exemption.\23\
---------------------------------------------------------------------------

    \22\ See 15 U.S.C. 78c-3(g)(3)(B).
    \23\ On December 21, 2010, the SEC proposed to exempt security-
based swaps used by small depository institutions, small Farm Credit 
System institutions, and small credit unions with total assets of 
$10 billion or less from clearing. See 75 FR 79992 (December 21, 
2010).
---------------------------------------------------------------------------

    Captive finance companies: Section 2(h)(7)(C) also provides that 
the definition of ``financial entity'' does not include an entity whose 
primary business is providing financing and uses derivatives for the 
purposes of hedging underlying commercial risks relating to interest 
rate and foreign exchange exposures, 90 percent or more of which arise 
from financing that facilitates the purchase or lease of products, 90 
percent or more of which are manufactured by the parent company or 
another subsidiary of the parent company (``captive finance 
company'').\24\ These entities can avail themselves of a clearing 
exception when they are using swaps to hedge or mitigate commercial 
risk and thus would be eligible for the exemption in the Agencies' 
margin rules pursuant to Sec.  _.1(d).
---------------------------------------------------------------------------

    \24\ See 7 U.S.C. 2(h)(7)(C)(iii).
---------------------------------------------------------------------------

B. Treasury Affiliates Acting as Agent

    TRIPRA provides that the initial and variation margin requirements 
shall not apply to a non-cleared swap in which a counterparty satisfies 
the criteria in section 2(h)(7)(D) of the Commodity Exchange Act or 
section 3C(g)(4) of the Securities Exchange Act. These sections provide 
that, where a person qualifies for an exception from the clearing 
requirements, an affiliate of that person (including an affiliate 
predominantly engaged in providing financing for the purchase of the 
merchandise or manufactured goods of the person) may qualify for the 
exception as well, but only if the affiliate is acting on behalf of the 
person and as an agent and uses the swap to hedge or mitigate the 
commercial risk of the person or other affiliate of the person that is 
not a financial entity (``treasury affiliate acting as agent'').\25\ A 
treasury affiliate acting as agent that meets the requirements for a 
clearing exemption would also be eligible for an exemption pursuant to 
Sec.  _.1(d) from the Agencies' joint final rule.
---------------------------------------------------------------------------

    \25\ See 7 U.S.C. 2(h)(7)(D); 15 U.S.C. 78c-3(g)(4). This 
exception does not apply to a person that is a swap dealer, 
security-based swap dealer, major swap participant, major security-
based swap participant, an issuer that would be an investment 
company as defined in section 3 of the Investment Company Act of 
1940 (15 U.S.C. 80a-3) but for section 3(c)(1) or 3(c)(7) of that 
Act, a commodity pool, or a bank holding company with over $50 
billion in consolidated assets.
---------------------------------------------------------------------------

C. Certain Cooperative Entities

    TRIPRA provides that the initial and variation margin requirements 
shall not apply to a non-cleared swap in which a counterparty qualifies 
for an exemption issued under section 4(c)(1) of the Commodity Exchange 
Act from the clearing requirements of section 2(h)(1)(A) of the 
Commodity Exchange Act for cooperative entities as defined in such 
exemption.\26\ The CFTC, pursuant to its authority under section 
4(c)(1) of the Commodity Exchange Act, adopted a regulation that allows 
cooperatives that are financial entities to elect an exemption from 
mandatory clearing of swaps that: (1) They enter into in connection 
with originating loans for their members; or (2) hedge or mitigate 
commercial risk related to loans to members or swaps with their members 
which are not financial entities or are exempt from the definition of 
financial entity.\27\ The swaps of these cooperatives that would 
qualify for an exemption from clearing also would qualify pursuant to 
Sec.  _.1(d) for an exemption from the margin requirements of the joint 
final rule.
---------------------------------------------------------------------------

    \26\ See 7 U.S.C. 6(c)(1). The CFTC, pursuant to its authority 
under section 4(c)(1) of the Commodity Exchange Act, adopted 17 CFR 
50.51, which allows cooperative financial entities that meet certain 
qualifications to elect not to clear certain swaps that are 
otherwise required to be cleared pursuant to section 2(h)(1)(A) of 
the Commodity Exchange Act.
    \27\ See 7 U.S.C. 6(c)(1);17 CFR 50.51.
---------------------------------------------------------------------------

III. Request for Comments

    The Agencies request comment on all aspects of the interim final 
rule.

IV. Administrative Law Matters

A. Administrative Procedures Act

    Pursuant to the Administrative Procedure Act (the ``APA''), at 5 
U.S.C. 553(b)(B), notice and comment are not required prior to the 
issuance of a final rule if an agency, for good cause, finds that 
``notice and public procedure thereon are impracticable, unnecessary, 
or contrary to the public interest.'' As discussed above, this interim 
final rule implements Title III of TRIPRA. In section 303 of TRIPRA, 
Congress required that the Agencies implement the provisions of Title 
III by promulgating an interim final rule and seeking public comment on 
the interim final rule. Given the statutory requirement for an interim 
final rule, the Agencies find that prior notice and comment in 
accordance with 5 U.S.C. 553(b) is impracticable. The Agencies are 
providing, however, an opportunity for comment before the effective 
date of the interim final rule (April 1, 2016).

B. Solicitation of Comments on Use of Plain Language

    Section 722 of the Gramm-Leach-Bliley Act, Public Law 106-102, sec. 
722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OCC, Board and 
FDIC to use plain language in all proposed and final rules published 
after January 1, 2000. The OCC, Board and FDIC invite your comments on 
how to make this proposal easier to understand. For example:
     Have we organized the material to suit your needs? If not, 
how could this material be better organized?
     Are the requirements in the regulation clearly stated? If 
not, how could the regulation be more clearly stated?
     Does the regulation contain language or jargon that is not 
clear? If so, which language requires clarification?
     Would a different format (grouping and order of sections, 
use of headings, paragraphing) make the regulation easier to 
understand? If so, what changes to the format would make the regulation 
easier to understand?
     What else could we do to make the regulation easier to 
understand?

C. Paperwork Reduction Act Analysis

    Certain provisions of the interim final rule contain ``collection 
of information'' requirements within the meaning of the Paperwork 
Reduction Act (PRA) of 1995 (44 U.S.C. 3501-3521). In accordance with 
the requirements of the PRA, the Agencies may not conduct or sponsor, 
and the respondent is not required to respond to, an information 
collection unless it displays a currently valid Office of Management 
and Budget (OMB) control number. The OMB control number for the OCC is 
1557-0251, the FDIC is 3064-0180, and the Board is 7100-0364. The 
information collection requirements contained in this joint notice of 
interim final rulemaking have been submitted to OMB for review and 
approval by the OCC and FDIC under section 3507(d) of the PRA and Sec.  
1320.11 of OMB's implementing regulations (5 CFR part 1320). The Board 
reviewed the interim final rule under the authority delegated to the 
Board by OMB.
    The interim final rule contains requirements subject to the PRA. 
The reporting requirements are found in Sec.  _.1(d). The interim final 
rule implements statutory language that requires certain swaps of 
certain counterparties to qualify for a statutory exemption or 
exception from clearing in order to not be subject to the initial and 
variation margin requirements of the joint final rule.

[[Page 74921]]

    Comments are invited on:
    (a) Whether the collections of information are necessary for the 
proper performance of the Agencies' functions, including whether the 
information has practical utility;
    (b) The accuracy of the estimates of the burden of the information 
collections, including the validity of the methodology and assumptions 
used;
    (c) Ways to enhance the quality, utility, and clarity of the 
information to be collected;
    (d) Ways to minimize the burden of the information collections on 
respondents, including through the use of automated collection 
techniques or other forms of information technology; and
    (e) Estimates of capital or start-up costs and costs of operation, 
maintenance, and purchase of services to provide information.
    All comments will become a matter of public record. Comments on 
aspects of this notice that may affect reporting or recordkeeping 
requirements and burden estimates should be sent to the addresses 
listed in the ADDRESSES section of this Supplementary Information. A 
copy of the comments may also be submitted to the OMB desk officer for 
the Agencies: By mail to U.S. Office of Management and Budget, 725 17th 
Street NW., #10235, Washington, DC 20503 or by facsimile to 202-395-
5806, Attention, Federal Banking Agency Desk Officer.
Proposed Information Collection
    Title of Information Collection: Reporting and Recordkeeping 
Requirements Associated with Margin and Capital Requirements for 
Covered Swap Entities.
    Frequency of Response: Annual, daily, and event-generated.
    Affected Public: The affected public of the OCC, FDIC, and Board is 
assigned generally in accordance with the entities covered by the scope 
and authority section of their respective interim final rule. 
Businesses or other for-profit.
    Respondents:
    OCC: Any national bank or a subsidiary thereof, Federal savings 
association or a subsidiary thereof, or Federal branch or agency of a 
foreign bank that is registered as a swap dealer, major swap 
participant, security-based swap dealer, or major security-based swap 
participant.
    FDIC: Any FDIC-insured state-chartered bank that is not a member of 
the Federal Reserve System or FDIC-insured state-chartered savings 
association that is registered as a swap dealer, major swap 
participant, security-based swap dealer, or major security-based swap 
participant.
    Board: Any state member bank (as defined in 12 CFR 208.2(g)), bank 
holding company (as defined in 12 U.S.C. 1841), savings and loan 
holding company (as defined in 12 U.S.C. 1467a), foreign banking 
organization (as defined in 12 CFR 211.21(o)), foreign bank that does 
not operate an insured branch, state branch or state agency of a 
foreign bank (as defined in 12 U.S.C. 3101(b)(11) and (12)), or Edge or 
agreement corporation (as defined in 12 CFR 211.1(c)(2) and (3)) that 
is registered as a swap dealer, major swap participant, security-based 
swap dealer, or major security-based swap participant.
    Abstract: This interim final rule implements Title III of the 
Terrorism Risk Insurance Program Reauthorization Act of 2015 
(``TRIPRA''), which exempts from the Agencies' swap margin rules non-
cleared swaps and non-cleared security-based swaps in which a 
counterparty qualifies for an exemption or exception from clearing 
under the Dodd-Frank Act. This interim final rule is a companion rule 
to the final rules adopted by the Agencies to implement section 731 and 
764 of the Dodd-Frank Act.
Reporting Requirements
    The interim final rule implements statutory language that requires 
certain swaps of certain counterparties to qualify for a statutory 
exemption or exception from clearing in order to not be subject to the 
initial and variation margin requirements of the joint final rule. The 
reporting requirements are found in Sec.  _.1(d) pursuant to cross-
references to other statutory provisions that set forth the conditions 
for an exemption from clearing. For example, TRIPRA provides that the 
initial and variation margin requirements of the joint final rule shall 
not apply to a non-cleared swap or non-cleared security-based swap in 
which a counterparty qualifies for an exception under section 
2(h)(7)(A) of the Commodity Exchange Act or section 3C(g)(1) of the 
Securities Exchange Act, which includes certain reporting requirements 
established by the applicable Commission.\28\ Certain other 
counterparties that are exempt from clearing pursuant to other 
provisions are also required to meet these reporting requirements to 
notify the respective Commissions.\29\ Thus, in certain cases, the 
statutory exemption from clearing requires a notification to the CFTC 
or SEC. These counterparties would be required to meet the same 
notification requirements that are required for an exception or 
exemption from clearing in order to qualify for an exception or 
exemption pursuant to Sec.  _.1(d) from the initial and variation 
margin requirements established by the Agencies under sections 731 and 
764 of the Dodd-Frank Act. Since this interim final rule serves to 
implement exemptions and exceptions by reference to existing statutory 
provisions, Sec.  _.1(d) imposes new reporting requirements that are 
required under the relevant statutory provisions.
---------------------------------------------------------------------------

    \28\ See, e.g., 17 CFR 50.50(b).
    \29\ For example, certain exempt cooperatives must meet these 
reporting requirements to qualify for an exemption from clearing. 
See 17 CFR 50.51(c). Similarly, exempt treasury affiliates also must 
be an affiliate of a person that qualifies for an exception from 
clearing that notifies the applicable Commission how it generally 
meets its financial obligations associated with entering into non-
cleared swaps. See 7 U.S.C. 2(h)(7)(D); 15 U.S.C. 78c-3(g)(4).
---------------------------------------------------------------------------

    Estimated Burden per Response: Sec.  _.1(d)--1 hour.
OCC
    Number of respondents: 20.
    Proposed revisions only estimated annual burden: 20,000 hours.
    Total estimated annual burden: 34,780 hours.
FDIC \30\
---------------------------------------------------------------------------

    \30\ The FDIC had initially estimated that three of its 
institutions might register as a swap dealer, major swap 
participant, security-based swap dealer or major security-based swap 
participant but no state non-member bank nor any state savings 
association has so registered, so FDIC is reducing its estimate to 
one as a placeholder for its information collection.
---------------------------------------------------------------------------

    Number of respondents: 1.
    Proposed revisions only estimated annual burden: 1,000 hours.
    Total estimated annual burden: 1,739 hours.
Board
    Number of respondents: 50.
    Proposed revisions only estimated annual burden: 50,000 hours.
    Total estimated annual burden: 86,964 hours.
    FCA: The FCA has determined that the interim final rule does not 
involve a collection of information pursuant to the Paperwork Reduction 
Act for Farm Credit System institutions because Farm Credit System 
institutions are Federally chartered instrumentalities of the United 
States and instrumentalities of the United States are specifically 
excepted from the definition of ``collection of information'' contained 
in 44 U.S.C. 3502(3).
    FHFA: With respect to any regulated entity as defined in section 
1303(20) of the Federal Housing Enterprises Financial Safety and 
Soundness Act of 1992, as amended (12 U.S.C. 4502(20)),

[[Page 74922]]

the interim final rule does not contain any collection of information 
that requires the approval of the OMB under the PRA.

D. Regulatory Flexibility Act Analysis

    Board: The Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
(``RFA'') \31\ generally requires an agency that is issuing a proposed 
rule to prepare and make available for public comment an initial 
regulatory flexibility analysis that describes the impact of the 
proposed rule on small entities. The Board observes that the interim 
final rule would not have a significant economic impact on a 
substantial number of small entities. The Board requests comment on its 
conclusion that the new interim final rule should not have a 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \31\ See 5 U.S.C. 601 et seq.
---------------------------------------------------------------------------

    As explained in detail above, this interim final rule implements 
section 302 of TRIPRA, which provides that initial and variation margin 
requirements will not apply to specified non-cleared swaps or non-
cleared security-based swaps of certain counterparties (to a covered 
swap entity). This interim final rule may have an effect on the 
following types of small entities: (i) Covered swap entities that are 
subject to the joint final rule's capital and margin requirements; and 
(ii) certain counterparties (e.g., nonfinancial end users and certain 
other small financial counterparties) that engage in swap transactions 
with covered swap entities.\32\
---------------------------------------------------------------------------

    \32\ The Board notes that the RFA does not require the Board to 
consider the impact of the interim final rule, including its 
indirect economic effects, on small entities that are not subject to 
the requirements of the interim final rule. See e.g., In Mid-Tex 
Electric Cooperative v. FERC, 773 F.2d 327 (D.C. Cir. 1985); United 
Distribution Cos. v. FERC, 88 F.3d 1105, 1170 (D.C. Cir. 1996); 
Cement Kiln Recycling Coalition v. EPA, 255 F.3d 855 (D.C. Cir. 
2001).
---------------------------------------------------------------------------

    Under Small Business Administration (the ``SBA'') regulations, the 
finance and insurance sector includes commercial banking, savings 
institutions, credit unions, other depository credit intermediation and 
credit card issuing entities (``financial institutions''), which 
generally are considered ``small'' if they have assets of $550 million 
or less.\33\ Covered swap entities would be considered financial 
institutions for purposes of the RFA in accordance with SBA 
regulations. The Board does not expect that any covered swap entity is 
likely to be a small financial institution, because a small financial 
institution is unlikely to engage in the level of swap activity that 
would require it to register as a swap dealer or major swap 
participant.\34\ None of the currently registered covered swap entities 
are small entities. The interim final rule would have an indirect 
effect on certain counterparties to non-cleared swaps and non-cleared 
security-based swaps. Many of these counterparties would be considered 
``small'' under the SBA's regulations.\35\ However, the effect of 
TRIPRA and the interim final rule will be to exempt many of the non-
cleared swaps and non-cleared security-based swaps of these 
counterparties from the margin requirements of the Agencies' joint 
final rule.
---------------------------------------------------------------------------

    \33\ See 13 CFR 121.201 (effective December 2, 2014); see also 
13 CFR 121.103(a)(6) (noting factors that the SBA considers in 
determining whether an entity qualifies as a small business, 
including receipts, employees, and other measures of its domestic 
and foreign affiliates).
    \34\ The CFTC has published a list of provisionally registered 
swap dealers (as of September 22, 2015) and provisionally registered 
major swap participants (as of March 1, 2013) that does not include 
any small financial institutions. See http://www.cftc.gov/LawRegulation/DoddFrankAct/registerswapdealer and http://www.cftc.gov/LawRegulation/DoddFrankAct/registermajorswappart. The 
SEC has not provided a similar list since it only recently adopted 
rules to provide for the registration of security-based swap dealers 
and major security-based swap participants. See 80 FR 48963 (August 
14, 2015); 17 CFR parts 240 and 249.
    \35\ See 13 CFR 121.201. In additional to small financial 
institutions with assets of $550 or less, swap counterparties could 
also include other small entities defined in regulations issued by 
the SBA, including firms within the ``Securities, Commodity 
Contracts, and Other Financial Investments and Related Activities'' 
sector with assets of $38.5 million or less and ``Funds, Trusts and 
Other Financial Vehicles'' with assets of $32.5 million or less.
---------------------------------------------------------------------------

    As described above, this interim final rule implements statutory 
language that requires certain swaps of certain counterparties to 
qualify for a statutory exemption or exception from the applicable 
clearing requirements in order to not be subject to the initial and 
variation margin requirements of the joint final rule. The reporting 
requirements are found in Sec.  _.1(d) of this interim final rule 
pursuant to cross-references to other statutory provisions that set 
forth the conditions for an exemption or exception from clearing. In 
certain cases, the statutory exemption from clearing and related 
regulations may require a counterparty to report information, such as 
how it meets its swaps obligations, to the CFTC or SEC. These 
counterparties would be required to meet the same notification 
requirements that are required for an exception or exemption from the 
relevant CFTC and SEC regulations. Other than this potential overlap of 
reporting obligations of this interim final rule and the relevant CFTC 
and SEC regulations, the Board is aware of any other Federal rules that 
duplicate, overlap, or conflict with this interim final rule. In light 
of the exemptions provided for the non-cleared swaps and non-cleared 
security-based swaps of many small entities, the Board does not believe 
that the interim final rule would have a significant economic impact on 
a substantial number of small entity counterparties.
    Since this interim final rule is required by section 303 of TRIPRA, 
the Board does not believe that there are any significant alternatives 
to the rule which would accomplish the stated objectives of the 
applicable statute. However, the Agencies welcome comment on any 
significant alternatives that would minimize the impact of the rule on 
small entities.
    In light of the foregoing, the Board does not believe that this 
interim final rule would have a significant economic impact on a 
substantial number of small entities.
    FDIC: The RFA requires an agency, in connection with a notice of 
final rulemaking, to prepare a Final Regulatory Flexibility Act 
analysis describing the impact of the rule on small entities (defined 
by the SBA for purposes of the RFA to include banking entities with 
total assets of $550 million or less) or to certify that the final rule 
will not have a significant economic impact on a substantial number of 
small entities.
    Using SBA's size standards, as of June 30, 2015, the FDIC 
supervised 3,357 small entities. The FDIC does not expect any small 
entity that it supervises is likely to be a covered swap entity because 
such entities are unlikely to engage in the level of swap activity that 
would require them to register as a swap entity. Because TRIPRA 
excludes non-cleared swaps entered into for hedging purposes by a 
financial institution with total assets of $10 billion or less from the 
requirement of the final rule, the FDIC expects that when a covered 
swap entity transactions non-cleared swaps with a small entity 
supervised by the FDIC, and such swaps are used to hedge the small 
entity's commercial risk, those swaps with not be subject to the final 
rule. The FDIC does not expect any small entity that it supervises will 
engage in non-cleared swaps for purposes other than hedging. Therefore, 
the FDIC does not believe that the interim final rule results in a 
significant economic impact on a substantial number of small entities 
under its supervisory jurisdiction.
    The FDIC certifies that the interim final rule does not have a 
significant economic impact on a substantial

[[Page 74923]]

number of small FDIC-supervised institutions.
    OCC: The Regulatory Flexibility Act (RFA) \36\ generally requires 
an agency that is issuing a proposed rule to prepare and make available 
for public comment an initial regulatory flexibility analysis that 
describes the impact of the proposed rule on small entities. The RFA 
does not apply to a rulemaking where a general notice of proposed 
rulemaking is not required.\37\ For the reasons described above in the 
Supplementary Information, the OCC has determined that it is 
unnecessary to publish a notice of proposed rulemaking for this interim 
final rule. Accordingly, the RFA's requirements relating to an initial 
and final regulatory flexibility analysis do not apply.
---------------------------------------------------------------------------

    \36\ See 5 U.S.C. 601 et seq.
    \37\ See 5 U.S.C. 603 and 604.
---------------------------------------------------------------------------

    FCA: Pursuant to section 605(b) of the Regulatory Flexibility Act, 
the FCA hereby certifies that the interim final rule will not have a 
significant economic impact on a substantial number of small entities. 
Each of the banks in the Farm Credit System, considered together with 
its affiliated associations, has assets and annual income in excess of 
the amounts that would qualify them as small entities. Nor does the 
Federal Agricultural Mortgage Corporation meet the definition of a 
``small entity.'' Therefore, Farm Credit System institutions are not 
``small entities'' as defined in the Regulatory Flexibility Act.
    FHFA: FHFA certifies that the interim final rule will not have a 
significant economic impact on a substantial number of small entities, 
since none of FHFA's regulated entities come within the meaning of 
small entities as defined in the Regulatory Flexibility Act (see 5 
U.S.C. 601(6)), and the interim final rule will not substantially 
affect any business that its regulated entities might conduct with such 
small entities.
Common Text of the Interim Final Rule (All Agencies)
    The common text of the interim final rule appears below:


Sec.  _.1  Authority, purpose, scope, exemptions and compliance dates.

* * * * *
    (d) Exemptions--(1) Swaps. The requirements of this part (except 
for Sec.  _.12) shall not apply to a non-cleared swap if the 
counterparty:
    (i) Qualifies for an exception from clearing under section 
2(h)(7)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(7)(A)) 
and implementing regulations;
    (ii) Qualifies for an exemption from clearing under a rule, 
regulation, or order that the Commodity Futures Trading Commission 
issued pursuant to its authority under section 4(c)(1) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 6(c)(1)) concerning cooperative entities 
that would otherwise be subject to the requirements of section 
2(h)(1)(A) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(1)(A)); 
or
    (iii) Satisfies the criteria in section 2(h)(7)(D) of the Commodity 
Exchange Act of 1936 (7 U.S.C. 2(h)(7)(D)) and implementing 
regulations.
    (2) Security-based swaps. The requirements of this part (except for 
Sec.  _.12) shall not apply to a non-cleared security-based swap if the 
counterparty:
    (i) Qualifies for an exception from clearing under section 3C(g)(1) 
of the Securities Exchange Act of 1934 (15 U.S.C. 78c-3(g)(1)) and 
implementing regulations; or
    (ii) Satisfies the criteria in section 3C(g)(4) of the Securities 
Exchange Act of 1934 (15 U.S.C. 78c-3(g)(4)) and implementing 
regulations.
* * * * *
[END OF COMMON TEXT]

List of Subjects

12 CFR Part 45

    Administrative practice and procedure, Capital, Margin 
requirements, National Banks, Federal Savings Associations, Reporting 
and recordkeeping requirements, Risk.

12 CFR Part 237

    Administrative practice and procedure, Banks and banking, Capital, 
Foreign banking, Holding companies, Margin requirements, Reporting and 
recordkeeping requirements, Risk.

12 CFR Part 349

    Administrative practice and procedure, Banks, Holding companies, 
Capital, Margin Requirements, Reporting and recordkeeping requirements, 
Savings associations Risk.

12 CFR Part 624

    Accounting, Agriculture, Banks, Banking, Capital, Cooperatives, 
Credit, Margin requirements, Reporting and recordkeeping requirements, 
Risk, Rural areas, Swaps.

12 CFR Part 1221

    Government-sponsored enterprises, Mortgages, Securities.

DEPARTMENT OF THE TREASURY

Office of the Comptroller of the Currency

12 CFR Chapter I

Authority and Issuance

    For the reasons set forth in the common preamble and under the 
authority of 12 U.S.C. 93a and 5412(b)(2)(B), the Office of the 
Comptroller of the Currency amends chapter I of title 12, Code of 
Federal Regulations, as follows:

PART 45--MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES

0
1. The authority citation for part 45 continues to read as follows:

    Authority: 7 U.S.C. 6s(e), 12 U.S.C. 1 et seq., 12 U.S.C. 93a, 
161, 481, 1818, 3907, 3909, 5412(b)(2)(B), and 15 U.S.C. 78o-10(e).


Sec.  45.1  [Amended]

0
2. Section 45.1 is amended by adding paragraph (d) as set forth at the 
end of the Common Preamble.

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

12 CFR Chapter II

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, the 
Board of Governors of the Federal Reserve System amends 12 CFR chapter 
II as follows:

PART 237--SWAPS MARGIN AND SWAPS PUSH-OUT

Subpart A--Margin and Capital Requirements for Covered Swap 
Entities (Regulation KK)

0
3. The authority citation for subpart A of part 237 continues to read 
as follows:

    Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), 12 U.S.C. 221 et 
seq., 12 U.S.C. 1818, 12 U.S.C. 1841 et seq., 12 U.S.C. 3101 et 
seq., 12 U.S.C. 1461 et seq.


Sec.  237.1  [Amended]

0
4. Section 237.1 is amended by:
0
a. Adding paragraph (d) as set forth at the end of the Common Preamble; 
and
0
b. Removing ``part'' wherever it appears in paragraph (d) and adding in 
its place ``subpart.''

FEDERAL DEPOSIT INSURANCE CORPORATION

12 CFR Chapter III

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, the

[[Page 74924]]

Federal Deposit Insurance Corporation amends 12 CFR chapter III as 
follows:

PART 349--DERIVATIVES

Subpart A--Margin and Capital Requirements for Covered Swap 
Entities

0
5. The authority citation for subpart A of part 349 continues to read 
as follows:

    Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), and 12 U.S.C. 
1818 and 12 U.S.C. 1819(a)(Tenth), 12 U.S.C.1813(q), 1818, 1819, and 
3108.


Sec.  349.1  [Amended]

0
6. Section 349.1 is amended by:
0
a. Adding paragraph (d) as set forth at the end of the Common Preamble.
0
b. Removing ``part'' wherever it appears in paragraph (d) and adding in 
its place ``subpart''.

FARM CREDIT ADMINISTRATION

12 CFR Chapter VI

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, the 
Farm Credit Administration is amending part 624 to chapter VI of title 
12, Code of Federal Regulations, as follows:

PART 624--MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP ENTITIES

0
7. The authority citation for part 624 continues to read as follows:

    Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), and secs. 4.3, 
5.9, 5.17, and 8.32 of the Farm Credit Act (12 U.S.C. 2154, 12 
U.S.C. 2243, 12 U.S.C. 2252, and 12 U.S.C. 2279bb-1).


Sec.  624.1  [Amended]

0
8. Section 624.1 is amended by adding paragraph (d) as set forth at the 
end of the Common Preamble.

FEDERAL HOUSING FINANCE AGENCY

Authority and Issuance

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, and 
under the authority of 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), 12 U.S.C. 
4513 and 12 U.S.C. 4526, the Federal Housing Finance Agency is amending 
part 1221 of subchapter B of chapter XII of title 12 of the Code of 
Federal Regulations as follows:

CHAPTER XII--FEDERAL HOUSING FINANCE AGENCY

SUBCHAPTER B--ENTITY REGULATIONS

PART 1221--MARGIN AND CAPITAL REQUIREMENTS FOR COVERED SWAP 
ENTITIES

0
9. The authority citation for part 1221 continues to read as follows:

    Authority: 7 U.S.C. 6s(e), 15 U.S.C. 78o-10(e), 12 U.S.C. 4513 
and 12 U.S.C. 4526(a).


Sec.  1221.1  [Amended]

0
10. Section 1221.1 is amended by adding paragraph (d) as set forth at 
the end of the Common Preamble.

    Dated: October 22, 2015.
Thomas J. Curry,
Comptroller of the Currency.
    By order of the Board of Governors of the Federal Reserve 
System, November 4, 2015.
Robert deV. Frierson,
Secretary of the Board.
    Dated at Washington, DC, this 22nd of October 2015.

    By order of the Board of Directors.

Federal Deposit Insurance Corporation.
Valerie J. Best,
Assistant Executive Secretary.
    Dated: October 21, 2015.
Dale L. Aultman,
Secretary, Farm Credit Administration Board.
    Dated: October 28, 2015.
Melvin L. Watt,
Director, Federal Housing Finance Agency.
[FR Doc. 2015-28670 Filed 11-27-15; 8:45 am]
 BILLING CODE 4810-33-P; 6210-01-P; 6714-01-P; 6705-01-P; 8070-01-P