FRB Adopts Final Rule Clarifying Treatment of Uninsured U.S. Branches and Agencies of Foreign Banks under Swaps Push-Out Provision of Dodd-Frank Act

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The FRB adopted a final rule (the “Final Rule”) that clarifies the treatment of uninsured U.S. branches and agencies of a foreign bank under the so-called swaps push-out provision (the “Push-Out Provision”) of section 716 of the Dodd-Frank Act.  The Push-Out Provision generally prohibits the provision of certain types of federal assistance (including deposit insurance and access to advances through the FRB’s discount window or other credit facility) to swaps entities such as swap dealers.  The Final Rule clarifies that uninsured U.S. branches or agencies of foreign banks will be treated in the same manner as insured depository institutions for purposes of the Push-Out Provision.  Accordingly, U.S. branches and agencies of foreign banks are also eligible to file a written request to the FRB seeking a transition period of up to 24 months during which the institution will come into compliance with the Push-Out Provision or conform their respective swaps activities to a statutory exemption available under section 716 of the Dodd-Frank Act.  Unless extended by the FRB for up to one additional year, the two-year transition period will expire: (i) in July 2015 if the applicable institution was a swaps entity on July 16, 2013; or (ii) if the applicable institution was not a swaps entity on July 16, 2013, the date that is 24 months after the date the institution became a swaps entity.  The Final Rule is substantively unchanged from the interim version of the final rule, which was discussed in the June 11, 2013 Financial Services Alert.  While section 716 of the Dodd-Frank Act became effective on July 16, 2013, the Final Rule becomes effective on January 31, 2014.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this informational piece (including any attachments) is not intended or written to be used, and may not be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.