In a move that will be welcomed by the U.S. foreign bank community and its clients, the Federal Reserve Board yesterday issued an interim final rule that accords foreign banks’ uninsured U.S. branches and agencies parity with U.S. insured depository institutions (“IDIs”) for purposes of the swaps push-out rule in Section 716 of the Dodd-Frank Act (the “Lincoln Amendment”). In the absence of the interim final rule, uninsured U.S. branches and agencies of foreign banks that are “swaps entities” would have been required to “push out” their swaps activities to an affiliate or otherwise cease their swaps activity by July 16, 2013 in order to be eligible for access to the discount window. Such branches and agencies, if they are state-licensed branches and agencies, now may apply to the Federal Reserve Board for a transition period of up to 24 months (with the possibility of an additional year) in which to conform their swaps activities to those permitted to IDIs under Section 716. State-licensed branches and agencies subject to the Lincoln Amendment will want to submit their requests to the Federal Reserve Board as soon as possible.

The interim rule is effective immediately.