Office of the Comptroller of the Currency, Department of the Treasury.
Notice of guidance.
The Office of the Comptroller of the Currency (OCC) is notifying insured Federal depository institutions 
that are or may become swap dealers that the OCC is prepared to consider favorably requests for a transition period pursuant to section 716(f) of the Dodd-Frank Act, provided that such requests conform to the procedures and conditions established in this notice.
This guidance is effective immediately. Written requests for transition periods should be submitted to the OCC by January 31, 2013.
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FOR FURTHER INFORMATION CONTACT:
Roman Goldstein, Senior Attorney, Ted Dowd, Assistant Director, or Ellen Broadman, Director, Securities and Corporate Practices Division, (202) 649-5510, 400 7th St. SW., Washington, DC 20219.
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Section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) prohibits providing Federal assistance to swaps entities, a term that includes Federal depository institutions 
that are swap dealers.
The prohibition does not apply to insured depository institutions that limit their swap activities to those activities specified in section 716(d) (conforming swap activities). The OCC, Board of Governors of the Federal Reserve System (Board), and Federal Deposit Insurance Corporation (FDIC) jointly issued guidance that section 716's effective date is July 16, 2013.
Section 716(f) provides that the appropriate Federal banking agency shall permit a transition period, as appropriate, for insured depository institution swap entities to divest or cease nonconforming swap activities.
The prohibition on Federal assistance does not apply during this transition period. The transition period, which begins on the effective date, initially may be up to 24 months, as determined by the insured depository institution's appropriate Federal banking agency 
in consultation with the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The appropriate Federal banking agency, after consulting with the CFTC and SEC, may extend the transition period for up to one additional year.
In establishing the length of a transition period for an insured depository institution, the appropriate Federal banking agency must take into account and make written findings regarding the potential impact of the divestiture or cessation of nonconforming swap activities on the institution's (1) mortgage lending, (2) small business lending, (3) job creation, and (4) capital formation versus the potential negative impact on insured depositors and the FDIC's Deposit Insurance Fund (DIF). The appropriate Federal banking agency may consider such other factors as it deems appropriate.Start Printed Page 1307
B. Transition Period
For the following reasons, the OCC has concluded that transition periods should be provided to insured Federal depository institutions to provide sufficient opportunity for institutions to conform their swaps activities in an orderly manner. First, section 716 assumes a regulatory framework that is not yet complete. Further development of the Title VII regulatory framework is necessary for insured Federal depository institutions to make well-informed determinations concerning business restructurings that may be necessary for section 716 conformance.
Second, the provision of transition periods while the Title VII regulatory framework continues to develop will provide regulatory certainty for insured Federal depository institutions in the near term and will mitigate potential disruptions to client services.
Third, transition periods will mitigate operational and credit risks for insured Federal depository institutions.
Section 716 anticipates that transition periods will be provided to avoid unwanted adverse consequences from premature implementation of section 716. For the reasons discussed above, the OCC believes that implementation of section 716 without transition periods would cause unwanted adverse consequences and that transition periods therefore are appropriate. Accordingly, an insured Federal depository institution that is or will be a swaps entity and that seeks a transition period for its nonconforming swaps activities should formally request a transition period from the OCC.
The OCC is prepared to consider such requests favorably, provided that the requests conform to the guidance provided below.
Each request must be written and specify the transition period appropriate to the institution, up to a two-year transition period commencing from July 16, 2013. The request must also discuss:
1. The institution's plan for conforming its swap activities;
2. How the requested transition period would mitigate adverse effects on mortgage lending, small business lending, job creation, and capital formation;
3. The extent to which the requested transition period could have a negative impact on the institution's insured depositors and the DIF;
4. Operational risks and other safety and soundness concerns that a transition period would mitigate.
5. Other facts that the institution believes the OCC should consider.
An insured Federal depository institution that is unsure if or when it will be or become a swaps entity may request a transition period. The request must contain the elements described above and additionally explain why the institution believes it might be or become a swaps entity under the CFTC's definition of swap dealer or the SEC's definition of security-based swap dealer.
The OCC may require a requesting insured Federal depository institution to provide additional information before establishing a transition period. The OCC may impose such conditions on a transition period as it deems necessary and appropriate.
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Dated: December 31, 2012.
Thomas J. Curry,
Comptroller of the Currency.
[FR Doc. 2013-00093 Filed 1-7-13; 8:45 am]
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