Deferral of the Swaps Push-Out Requirement, But Only for Insured Federal Depository Institutions

An insured federal depository institution may request a transition period to comply with the “push-out” requirements of section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) according to guidance issued by the Office of the Comptroller of the Currency (“OCC”) on December 31, 2012 (“Guidance”). Insured federal depository institutions granted a transition period will be allowed for a time — but not beyond July 16, 2015 — to defer compliance with the requirement to conduct swaps activities in a separate entity in order to continue to qualify for access to the Federal Reserve discount window and other funding programs sponsored by the US government. Requests for a transition period are to be made in writing to the OCC by January 31, 2013.

The Guidance derives from section 716 of the Dodd-Frank Act that allows the appropriate federal banking supervisor to provide “an insured depository institution that qualifies as a ‘‘swaps entity’’ and would be subject to the federal assistance prohibition” a transition period of up to 24 months to divest its swaps entity or cease the activities that require registration as a swaps entity.2 That provision also allows for the grant of an additional one-year extension on top of the “up to 24-month” initial extension, but that is not part of the Guidance.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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