Extension of the Swap Margin Rule Compliance Dates: Interim Final Rule

Summary

On June 25, 2020, the Office of the Comptroller of the Currency (OCC), the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Farm Credit Administration, and the Federal Housing Finance Agency (collectively, the agencies) adopted and invited comment on an interim final rule amending their regulations that require swap dealers, major swap participants, security-based swap dealers, and major security-based swap participants (covered swap entities) under their respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margin Rule). The interim final rule provides covered swap entities an additional year to implement initial margin requirements for certain smaller counterparties. The interim final rule is effective on September 1, 2020. Comments are due on August 31, 2020.

The OCC’s Swap Margin Rule applies to certain national banks, federal savings associations, and federal branches and agencies of foreign banking organizations (collectively, banks).

Highlights

In response to the COVID-19 national emergency, the interim final rule provides covered swap entities additional time to comply with the Swap Margin Rule’s phases 5 and 6 initial margin implementation deadlines by

• delaying the effective date for phase 5 from September 1, 2020, to September 1, 2021.
• delaying the effective date for phase 6 from September 1, 2021, to September 1, 2022.

The agencies’ objective is to give covered swap entities additional time to meet their obligations under the Swap Margin Rule without hampering efforts underway to address exigent circumstances caused by the COVID-19 national emergency.

Background

The implementation of the Swap Margin Rule’s initial and variation margin requirements started on September 1, 2016. With respect to initial margin, the requirements in the Swap Margin Rule were originally implemented in five phases from September 1, 2016, through September 1, 2020, depending on the size of the covered swap entity’s portfolio of non-cleared swaps and the counterparty’s portfolio of non-cleared swaps. Variation margin requirements for all covered swap entities and counterparties were completely phased in by March 1, 2017. This schedule was consistent with the international framework for margin requirements jointly established by the Basel Committee on Banking Supervision and the International Organization of Securities Commissions when the Swap Margin Rule was adopted in 2015. On July 1, 2020, the agencies published a final rule that extended the deadline for smaller members of the fifth-phase group by creating a new sixth phase with a compliance date of September 1, 2021.

Further Information

Please contact Christopher McBride, Director for Market Risk, Treasury and Market Risk Policy, at (202) 649-6360, or Jamey Basham, Assistant Director, Chief Counsel’s Office, at (202) 649-6490.

Jonathan V. Gould
Senior Deputy Comptroller and Chief Counsel

Related Link

• Margin and Capital Requirements for Covered Swap Entities: Interim Final Rule and Request for Comment (PDF)