On December 16, 2014, President Barack Obama limited the scope of swaps and security-based swaps subject to the Dodd-Frank Wall Street Reform and Consumer Protection Act’s (“Dodd-Frank Act’s”) pushout requirement to certain asset-backed security swaps when he signed into law the Consolidated and Further Continuing Appropriations Act, 2015. This Act contains an amendment to Section 716 of the Dodd-Frank Act, commonly known as the Lincoln Amendment, or the Swaps Pushout Rule (hereinafter, “Swaps Pushout Rule”). The new amendment also codifies the Federal Reserve Board’s rule that uninsured branches and agencies of foreign banks may receive the same exceptions as insured depository institutions (“IDIs”) from the pushout requirement. A redlined copy of the amendment is available here.

THE ORIGINAL SWAPS PUSHOUT RULE -

The Swaps Pushout Rule generally prohibits “federal assistance” to “swaps entities,” defined as swap dealers, major swap participants, security-based swap dealers and major security-based swap participants, that are registered under the Commodity Exchange Act or the Securities Exchange Act of 1934. Federal assistance is defined in the rule to include certain advances from a Federal Reserve credit facility or discount window and Federal Deposit Insurance Corporation (“FDIC”) deposit insurance or guarantees. The Swaps Pushout Rule effectively requires banks that are swaps entities to push out certain swaps activities to a separately capitalized affiliate or cease the activities altogether, unless an exception applies.