New York Codes, Rules and Regulations
Title 3 - BANKING
Chapter I - GENERAL REGULATIONS OF THE SUPERINTENDENT
Part 117 - LENDING LIMITS: INCLUSION OF CREDIT EXPOSURES ARISING FROM DERIVATIVE TRANSACTIONS
Section 117.1 - Definitions

Universal Citation: 3 NY Comp Codes Rules and Regs ยง 117.1

Current through Register Vol. 46, No. 12, March 20, 2024

For the purposes of this Part:

(a) The appropriate Federal banking agency of a bank shall be the agency specified by section 3(q) of the Federal Deposit Insurance Act (FDIA), 12 USC section 1813(q), or the successor to such provision.

(b) Bank includes a bank or trust company or a savings bank formed under the Banking Law whose deposits are insured by the Federal Deposit Insurance Corporation (FDIC).

(c) Credit derivative means a financial contract that allows one party (the protection purchaser) to transfer the credit risk of one or more exposures (reference exposure) to another party (the protection provider).

(d) The current credit exposure of a bank to a counterparty on a particular date with respect to a derivative transaction other than a credit derivative shall be the amount that the bank reasonably determines would be its loss under the terms of the derivative contract covering such transaction if the counterparty defaulted on such date.

(e) The credit exposure of a bank to a counterparty arising from derivative transactions other than credit derivatives is the higher of zero or the sum of the then positive current credit exposures with respect to such derivative transactions, provided, however, that in calculating such credit exposure, the bank may take into account netting to the extent specified in section 117.4(a) of this Part.

(f) Derivative transaction includes any transaction that is a contract, agreement, swap, warrant, note, or option that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the occurrence of any event relating to, one or more commodities, securities, currencies, interest or other rates, indices, or other assets.

(g) Effective margining arrangement means a master legal agreement governing derivative transactions between a bank and a counterparty that requires the counterparty to post, on a daily basis, variation margin to fully collateralize that amount of the bank's net credit exposure to the counterparty that exceeds $25 million created by the derivative transactions covered by the agreement.

(h) Eligible credit derivative means a single-name credit derivative or a standard, non-tranched index credit derivative, provided that:

(1) the derivative contract is executed under standard industry credit derivative documentation and meets the requirements of an eligible guarantee and has been confirmed by both the protection purchaser and the protection provider;

(2) any assignment of the derivative contract has been confirmed by all relevant parties;

(3) if the credit derivative is a credit default swap, the derivative contract includes the following credit events:
(i) failure to pay any amount due under the terms of the reference exposure, subject to any applicable minimal payment threshold that is consistent with standard market practice and with a grace period that is closely in line with the grace period of the reference exposure; and

(ii) bankruptcy, insolvency, restructuring (for obligors not subject to bankruptcy or insolvency) inability of the obligor on the reference exposure to pay its debts, or its failure or admission in writing of its inability generally to pay its debts as they become due and similar events;

(4) the terms and conditions dictating the manner in which the derivative contract is to be settled are incorporated into the contract; and

(5) if the derivative contract allows for cash settlement, the contract incorporates a robust valuation process.

(i) Eligible protection provider means:

(1) a sovereign entity (a central government, including the United States government; an agency; department; ministry; or central bank);

(2) this state or any city, county, town, village or school district of this State, the New York State Thruway Authority, the Metropolitan Transportation Authority, the Triborough Bridge and Tunnel Authority or The Port Authority of New York and New Jersey;

(3) any state other than the State of New York;

(4) the Bank for International Settlements, the International Monetary Fund, the European Central Bank, the European Commission, or a multilateral development bank;

(5) a Federal Home Loan Bank;

(6) the Federal Agricultural Mortgage Corporation;

(7) a depository institution, as defined in section 3(c) of the FDIA, 12 U.S.C. section 1813(c);

(8) a bank holding company, as defined in section 2 of the Bank Holding Company Act, 12 U.S.C. section 1841;

(9) a savings and loan holding company, as defined in section 10 of the Home Owners' Loan Act, 12 U.S.C. section 1467 a;

(10) a securities broker or dealer registered with the Securities and Exchange Commission (SEC) under the Securities Exchange Act of 1934, 15 U.S.C. section 78 aet seq.;

(11) an insurance company that is subject to the supervision of a State insurance regulator;

(12) a foreign banking organization;

(13) a non-United States-based securities firm or a non-United States-based insurance company that is subject to consolidated supervision and regulation comparable to that imposed on U.S. depository institutions, securities broker-dealers, or insurance companies;

(14) a qualifying central counterparty; and

(15) such other entity or entities as may be designated from time to time by the superintendent.

(j) Readily marketable collateral means financial instruments and bullion that are salable under ordinary market conditions with reasonable promptness at a fair market value.

(k) Financial market utility shall have the same meaning as used in section 803(6) of the Dodd""Frank Wall Street Reform and Consumer Protection Act, 12 U.S.C. section 5462(6).

(l) The following terms shall have the same meaning as used in the Capital Adequacy Guidelines for Banks: Internal-Ratings-Based and Advanced Measurement Approaches (Capital Adequacy Guidelines) of the bank's appropriate Federal banking agency.1

(1) Eligible guarantee.

(2) Qualifying netting agreement.

(3) Qualifying central counterparty.

Footnotes

1 In the case of a bank that is a member of the Federal Reserve System (member bank), the applicable definitions appear at section 2 of appendix F to 12 C.F.R. part 208, and the case an federally-insured bank that is not a member of the Federal Reserve System (nonmember insured bank), the applicable definitions appear at section 2 of appendix D to 12 C.F.R. part 325.

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