Office of the Comptroller of the Currency, Treasury (OCC); Board of Governors of the Federal Reserve System (Board); Federal Deposit Insurance Corporation (FDIC); Farm Credit Administration (FCA); and the Federal Housing Finance Agency (FHFA).
Interim final rule and request for comment.
The OCC, Board, FDIC, FCA, and FHFA (each an Agency and, collectively, the Agencies) are adopting and invite comment on an interim final rule amending the Agencies' regulations that require swap dealers and security-based swap dealers under the Agencies' respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margin Rule). The Swap Margin Rule takes effect under a phased compliance schedule stretching from 2016 through 2020, and the dealers covered by the rule continue to hold swaps in their portfolios that were entered into before the effective dates of the rule. Those swaps are grandfathered from the Swap Margin Rule's requirements until they expire according to their terms. There are currently financial services firms located within the United Kingdom (U.K.) that conduct swap dealing activities subject to the Swap Margin Rule. The U.K. has provided formal notice of its intention to withdraw from the European Union (E.U.) on March 29, 2019. If this transpires without a negotiated agreement between the U.K. and E.U., these entities located in the U.K. may not be authorized to provide full-scope financial services to swap counterparties located in the E.U. The Agencies' policy objective in developing the interim final rule is to address one aspect of the scenario likely to ensue, whereby entities located in the U.K. might transfer their existing swap portfolios that face counterparties located in the E.U. over to an affiliate or other related establishment located within the E.U. or the United States (U.S.). The Agencies seek to address industry concerns about the status of grandfathered swaps in this scenario, so the industry can focus on making preparations for swap transfers. These transfers, if carried out in accordance with the conditions of the interim final rule, will not trigger the application of the Swap Margin Rule to grandfathered swaps that were entered into before the compliance dates of the Swap Margin Rule.
The interim final rule is effective March 19, 2019. Comments should be received on or before April 18, 2019.
Interested parties are encouraged to submit written comments jointly to all of the Agencies. Commenters are encouraged to use the title “Margin and Capital Requirements for Covered Swap Entities” to facilitate the organization and distribution of comments among the Agencies.
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You may review comments and other related materials that pertain to this rulemaking action by any of the following methods:
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All public comments are available from the Board's website at
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All comments received by the deadline will be posted for public inspection without change, including any personal information you provide, such as your name, address, email address and telephone number on the FHFA website at
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You may review copies of all comments we receive at our office in McLean, Virginia or on our website at
The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act)
The Agencies are issuing this interim final rule in connection with efforts to assist covered swap entities as they prepare for the event commonly described as “Brexit.” In particular, this interim final rule is intended to address a covered swap entity's ability to service its cross-border clients in the event that the U.K. withdraws from the E.U. without a Withdrawal Agreement.
In issuing the Swap Margin Rule in 2015, the Agencies established an effective date of April 1, 2016, with a phased in compliance schedule for the initial and variation margin requirements.
The Swap Margin Rule's requirements generally apply only to a non-cleared swap entered into on or after the applicable compliance date.
The Swap Margin Rule has a broad territorial reach. It applies to swap dealers and security-based swap dealers that are registered with the CFTC or the SEC, respectively, and for which one of the Agencies is the prudential regulator, including, for example, certain foreign banks and foreign banking organizations, certain entities established abroad by U.S. banks, and certain foreign branches of U.S. banks. Typically, such firms are registered in the foreign jurisdiction in which they are located with the appropriate financial regulatory authorities, but the firms may also conduct swap activities with counterparties that have significant ties to the U.S. (or the dealer itself may be a branch of a U.S. bank) under circumstances that trigger dealer registration obligations with the CFTC or SEC. The Agencies included an exemption from the requirements of the Swap Margin Rule that applies whenever a foreign covered swap entity engages in a foreign non-cleared swap, but the rule's margin requirements still apply when the counterparty has certain connections to the U.S., such as when the counterparty is a foreign branch or office of an entity organized under U.S. federal or state law.
As a result, there are instances in which a covered swap entity engages in non-cleared swap activities out of establishments in the U.K. that are subject to the requirements of the Swap Margin Rule. The same is true in certain instances for a covered swap entity engaging in those activities out of an establishment in another E.U. Member State.
Financial entities, including covered swap entities, in the U.K. face uncertainty about the applicable regulatory framework they will operate within after a U.K. withdrawal from the E.U. In many instances, these firms made a strategic decision decades ago to use a U.K. establishment as their base of operations to provide financial services to customers across the E.U., consistent with the E.U.'s system of cross-border authorizations to engage in regulated financial activities (known as “passporting”). These firms have been mindful that one consequence of a U.K. exit from the E.U. absent a Withdrawal Agreement will be an inability of the firms to continue providing investment services in the E.U. under the current passporting regime. As a result, they might not be in a position to perform certain operations in relation to derivatives contracts they presently have with E.U. clients. In order to address this situation, these firms could transfer their derivatives to a related establishment in an E.U. Member State, which in turn would benefit from the passporting regime.
In addition, a covered swap entity that operates an establishment located outside the U.K. may be affected if the U.K. exits the E.U. without a Withdrawal Agreement. These covered swap entities may have entered into non-cleared swaps with financial entities located in the U.K. These U.K. counterparties of the covered swap entity may need to relocate certain operations, in order to continue providing financial services to their own customers in the E.U. Accordingly, a covered swap entity's counterparties with establishments in the U.K. may seek to transfer their non-cleared swaps to related establishments of their own in an E.U. Member State.
In recent months, some financial entities have initiated processes under which a U.K. court sanctions a bulk transfer of their business, including derivatives, from the balance sheets of their U.K. establishments to a different location established by the dealer in another E.U. Member State.
The scheduled date of the U.K. withdrawal is March 29, 2019. The Agencies believe it is appropriate to provide clarity, in order to facilitate the work of covered swap entities and their counterparties to transfer non-cleared swaps in response to a U.K. exit from the E.U. absent a Withdrawal Agreement, without thereby converting their legacy swaps into covered swaps subject to the Swap Margin Rule. The conditions of eligibility for the transfers are described in the next section of this
As discussed above, legacy swaps are generally grandfathered from the Swap Margin Rule's requirements. More specifically, § __.1(e) states that covered swap entities shall comply with the Swap Margin Rule's minimum margin requirements for non-cleared swaps entered into on or after the compliance date that the rule establishes for separate classes of counterparties, depending on the size of their swaps portfolios.
In the interim final rule, the Agencies are amending § __.1 to add an additional provision, paragraph § __.1(h). This new provision is designed to preserve the status quo for legacy swaps for a covered swap entity in the event of a “no-deal” U.K. withdrawal, regardless of whether that covered swap entity is the swap counterparty directly involved in the transfer out of the U.K. or the counterparty on the other side of the swap.
A covered swap entity may, for example, use its establishment in the E.U. to take on non-cleared swap portfolios from its swap dealing affiliate in the U.K. In a different case, the covered swap entity's establishments in the E.U. and the U.K. may both be branches of the same swap dealing bank. Alternatively, there may be yet a different relationship due to the structure of the specific financial entity involved.
On the other hand, the covered swap entity may not move its operations in any way, but it may have existing portfolios of non-cleared swaps facing counterparties who are themselves relocating out of the U.K., to an affiliate, or a branch, or some other type of establishment outside of the U.K.
To be effective, the Agencies believe this interim final rule must cover the different scenarios that would trigger the need for a covered swap entity to participate in amending a non-cleared swap in order to “relocate” the swap, either on account of its own need to move non-cleared swaps out of the U.K., or its counterparty's need to do so.
Accordingly, the text of the interim final rule is intended to be flexible as to the nature of the financial entity's establishment—covered swap entity or counterparty—maintained in the U.K., be it an entity organized under U.K. law, or a branch or other authorized office maintained in the U.K. by a firm that is legally organized elsewhere. This flexibility extends to the establishment to which the non-cleared swaps are transferred, so long as the transferring establishment in the U.K. is related to the receiving establishment outside the U.K.
To benefit from the treatment of this new legacy swap provision, the financial entity located in the U.K. must arrange to make the amendments to the non-cleared swap solely for the purpose of transferring the non-cleared swap to an affiliate or other related establishment that is located in an E.U. Member State (once the U.K. has withdrawn from the E.U., as further discussed below). This purpose test also contains a requirement that the transfer be made in connection with the U.K. entity's planning for the possibility that the U.K. might exit the E.U. without a Withdrawal Agreement, or the U.K. entity's response to such event.
The interim final rule is intended to be flexible as to whether the relationship aspect of the purpose test is due to affiliation between separately-incorporated entities, branching of a single business entity in different jurisdictions, or some other form of business establishment through which an arm of the financial entity may be legally authorized to conduct business in the E.U. Member State. The Agencies have similarly included transfers to an affiliate, or branch or other authorized form of establishment, that the financial entity maintains in the U.S. to provide additional flexibility for financial entities with U.S. headquarters or other U.S. establishments.
For compliance purposes, the interim final rule makes one distinction between a transfer initiated by the financial entity standing as the covered swap entity at the completion of the transaction, versus a transfer initiated by the covered swap entity's counterparty. For the latter, the counterparty must make a representation to the covered swap entity that the counterparty carried out the swap in accordance with both elements of the purpose test.
The interim final rule is designed to permit such amendments as financial entities find necessary to relocate non-cleared swap portfolios out of the U.K. under the purpose test. These changes may be carried out using any of the methods typically employed for effecting non-cleared swap transfers, including industry protocols, contractual amendments, or contractual tear-up and replacement. To the extent they would otherwise trigger margin requirements, judicially-supervised changes that result in a non-cleared swap being booked at or held by a related establishment in the E.U., including by means of the court-sanctioned process available under Part VII of the U.K.'s Financial Services and Markets Act of 2000, are similarly within the scope of the interim final rule.
However, the Agencies do not believe the relief being provided for relocation purposes should be expansively applied to encompass economic changes to a legacy swap. Accordingly, the rule text makes legacy swap status unavailable if the amendments to a non-cleared swap modify the payment amount calculation methods, the maturity date, or the notional amount of the non-cleared swap. Thus, for example, if the day count convention of a non-cleared swap changes as a consequence of re-locating a non-cleared interest rate swap several time zones away from the U.K., the parties to the swap would not be changing the payment amount calculation methods. On the other hand, a change to one of the payment amount calculation economic factors (
The Agencies also seek to establish a reasonable period of time for the necessary work to achieve the transfers to be performed. The interim final rule permits transfers for a period of one year after a U.K. withdrawal. The 1-year
The Agencies believe that a provision enabling entities to transfer non-cleared swaps while retaining legacy status would be most effective if the timeframe allowed takes into account the timeframe under corresponding E.U. legislation. As noted above, the ESAs have submitted novation amendments for their margin rules in proposed form to the European Commission, but the relief that would be afforded thereby has not yet been finalized under the E.U. process.
The interim final rule differs from the ESAs' proposed amendments to the extent that the legacy status protection afforded under the ESAs' approach is unavailable to derivatives entered into after the official, final publication of the amendments (which establishes the legal effective date of the rule). The Agencies have provided legacy status protection to any swap entered into before the applicable compliance date—of which there are two still upcoming, on September 1, 2019 and September 1, 2020—with no cutoff for swaps executed before those dates but after issuance of this interim final rule. The Agencies believe the marginal volume of additional legacy swaps that will be protected by the Agencies' approach is not likely to be substantial, and the additional time granted could facilitate a more organized transition for the affected counterparties.
The Agencies request comment on all aspects of the interim final rule as well as on the following specific questions.
(1) The interim final rule permits amendments to non-cleared swaps in order to transfer swaps in response to the scenario in which the U.K. exits the E.U. in the absence of a Withdrawal Agreement. As explained above, the Agencies seek to encompass changes through a variety of methods, including industry protocols, contractual amendments, transfers permitted by judicial proceedings, and contractual tear-up and replacement. What, if any, additional clarification in the rule as to types of permissible amendments should the Agencies provide? What specifically should be added or clarified, and why is it necessary in order to achieve the Agencies' policy objectives in the context of a U.K. withdrawal from the E.U.?
(2) The relief provided by the interim final rule applies to the transfer of swaps from a financial entity's establishment in the U.K. to an establishment in the E.U. or the U.S. What, if any, other types of relief should be considered for swaps that are transferred from the E.U. to the U.K.? Please provide a description of the circumstances creating this need, including the frequency of its occurrence.
(3) The transfers that are accommodated by the interim final rule are available only between affiliates or other related establishments. The Agencies do not intend the relief provided by the interim final rule to provide an opportunity for financial entities to seek out a new dealer relationship and retain legacy swap treatment. However, the Agencies request comment on whether there may be financial entities that are unable to arrange a transfer of legacy swaps unless the transfer is to an unrelated entity outside the U.K. and are thus not covered under the terms of the interim final rule. Commenters should provide descriptions of the factual circumstances, including the frequency of its occurrence.
The Agencies are issuing the interim final rule without prior notice and the opportunity for public comment and without the 30-day delayed effective date ordinarily prescribed by the Administrative Procedure Act (APA).
As discussed above, the interim final rule addresses a potential impact of the scenario in which the U.K. exits from the E.U. in the absence of a Withdrawal Agreement. The U.K.'s exit is expected to occur on March 29, 2019. The interim final rule facilitates the ability of a financial entity with non-cleared swaps located in the U.K. to relocate existing swap portfolios over to affiliates or other related entities located within the E.U. or U.S., without the “grandfathered” legacy swaps in the portfolios becoming subject to the Swap Margin Rule. As such, the interim final rule benefits covered swap entities subject to the Swap Margin Rule by removing an impediment to the transfers and maintaining the status quo of a legacy swap. The interim final rule does not impose any requirements or mandatory burden on any covered swap entity.
The Agencies believe that the public interest is best served by making the interim final rule effective as soon as possible as a result of the expected timing of events in the U.K. The Agencies believe that issuing the interim final rule will provide the certainty necessary to facilitate the industry's efforts to begin arranging their transfers immediately upon the
The APA also requires a 30-day delayed effective date, except for (1) substantive rules which grant or recognize an exemption or relieve a restriction; (2) interpretative rules and statements of policy; or (3) as otherwise provided by the agency for good cause.
While the Agencies believe there is good cause to issue the interim final rule without advance notice and comment and with an immediate effective date, the Agencies are requesting comment on all aspects of the interim final rule.
Section 722 of the Gramm-Leach-Bliley Act, Public Law 106–102, sec. 722, 113 Stat. 1338, 1471 (Nov. 12, 1999), requires the OCC, Board and FDIC to use plain language in all proposed and final rules published after January 1, 2000. The OCC, Board and FDIC invite your comments on how to make this proposal easier to understand. For example:
• Have we organized the material to suit your needs? If not, how could this material be better organized?
• Are the requirements in the regulation clearly stated? If not, how could the regulation be more clearly stated?
• Does the regulation contain language or jargon that is not clear? If so, which language requires clarification?
• Would a different format (grouping and order of sections, use of headings, paragraphing) make the regulation easier to understand? If so, what changes to the format would make the regulation easier to understand?
• What else could we do to make the regulation easier to understand?
In accordance with the requirements of the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501–3521, the Agencies may not conduct or sponsor, and a respondent is not required to respond to, an information collection unless it displays a currently-valid Office of Management and Budget (OMB) control number. The OCC, Board, and FDIC have reviewed this interim final rule and determined that it introduces a new collection of information pursuant to the PRA and the OCC and FDIC have submitted it to OMB for review under section 3507(d) of the PRA (44 U.S.C. 3507(d)) and section 1320.11 of the OMB's implementing regulations (5 CFR 1320). The Board has reviewed the information collection under its delegated authority. The OMB Control Numbers are: 1557–0251 (OCC), 3064–0204 (FDIC), and 7100–0364 (Board).
Section __.1(h) specifies that transfers of legacy swaps initiated by a covered swap entity's counterparty require a representation to the covered swap entity that the counterparty carried out the swap in accordance with both elements of the purpose test
Comments are invited on:
a. Whether the collections of information are necessary for the proper performance of the agencies' functions, including whether the information has practical utility;
b. The accuracy or the estimate of the burden of the information collections, including the validity of the methodology and assumptions used;
c. Ways to enhance the quality, utility, and clarity of the information to be collected;
d. Ways to minimize the burden of the information collections on respondents, including through the use of automated collection techniques or other forms of information technology; and
e. Estimates of capital or startup costs and costs of operation, maintenance, and purchase of services to provide information.
All comments will become a matter of public record. Comments on aspects of this notice that may affect reporting, recordkeeping, or disclosure requirements and burden estimates should be sent to the addresses listed in the
Section 202 of the Unfunded Mandates Reform Act of 1995 (Unfunded Mandates Act), 2 U.S.C. 1532, requires the OCC to prepare a budgetary impact statement before promulgating any final rule for which a general notice of proposed rulemaking was published. As discussed above, the OCC has determined for good cause that the publication of a general notice of proposed rulemaking is impracticable and contrary to the public interest. Accordingly, this joint final rule is not subject to section 202 of the Unfunded Mandates Act.
The Riegle Community Development and Regulatory Improvement Act of 1994 (RCDRIA) requires that each Federal banking agency, in determining the effective date and administrative compliance requirements for new regulations that impose additional reporting, disclosure, or other requirements on insured depository institutions, consider, consistent with principles of safety and soundness and the public interest, any administrative burdens that such regulations would place on depository institutions, including small depository institutions, and customers of depository institutions, as well as the benefits of such regulations. In addition, new regulations and amendments to regulations that impose additional reporting, disclosures, or other new requirements on insured depository institutions generally must take effect on the first day of a calendar quarter that begins on or after the date on which the regulations are published in final form.
Administrative practice and procedure, Capital, Margin requirements, National banks, Federal savings associations, Reporting and recordkeeping requirements, Risk.
Administrative practice and procedure, Banks, Banking, Foreign banking, Holding companies, Reporting and recordkeeping requirements, Swaps.
Administrative practice and procedure, Banks, Banking, Holding companies, Capital, Margin Requirements, Reporting and recordkeeping requirements, Savings associations, Risk, Swaps.
Accounting, Agriculture, Banks, Banking, Capital, Cooperatives, Credit, Margin requirements, Reporting and recordkeeping requirements, Risk, Rural areas, Swaps.
Government-sponsored enterprises, Mortgages, Securities.
For the reasons set forth in the common preamble and under the authority of 12 U.S.C. 93a and 5412(b)(2)(B), the Office of the Comptroller of the Currency amends chapter I of Title 12, Code of Federal Regulations, as follows:
7 U.S.C. 6s(e), 12 U.S.C. 1
(h)
(1) [Reserved]
(2) The non-cleared swap or non-cleared security based swap was amended under the following conditions:
(i) The swap was originally entered into before the relevant compliance date established in paragraph (e) of this section and one party to the swap booked it at, or otherwise held it at, an entity (including a branch or other authorized form of establishment) located in the United Kingdom;
(ii) The entity in the United Kingdom subsequently arranged to amend the swap, solely for the purpose of transferring it to an affiliate, or a branch or other authorized form of establishment, located in any European Union member state or the United States, in connection with the entity's planning for or response to the event described in paragraph (h)(2)(iii) of this section, and the transferee is:
(A) A covered swap entity, or
(B) A covered swap entity's counterparty to the swap, and the counterparty represents to the covered swap entity that the counterparty performed the transfer in compliance with the requirements of paragraphs (h)(2)(i) and (ii) of this section;
(iii) The law of the European Union ceases to apply to the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, without conclusion of a Withdrawal Agreement between the United Kingdom and the European Union pursuant to Article 50(2);
(iv) The amendments do not modify any of the following: The payment amount calculation methods, the maturity date, or the notional amount of the swap;
(v) The amendments cause the transfer to take effect on or after the date of the event described in paragraph (h)(2)(iii) of this section transpires; and
(iv) The amendments cause the transfer to take effect by the later of:
(A) The date that is one year after the date of the event described in paragraph (h)(2)(iii); or
(B) Such other date permitted by transitional provisions under Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as amended.
For the reasons set forth in the preamble, the Board of Governors of the Federal Reserve System amends 12 CFR part 237 to read as follows:
7 U.S.C. 6s(e), 15 U.S.C. 78o–10(e), 15 U.S.C. 8305, 12 U.S.C. 221
(h)
(1) [Reserved]
(2) The non-cleared swap or non-cleared security based swap was amended under the following conditions:
(i) The swap was originally entered into before the relevant compliance date established in paragraph (e) of this section and one party to the swap booked it at, or otherwise held it at, an entity (including a branch or other authorized form of establishment) located in the United Kingdom;
(ii) The entity in the United Kingdom subsequently arranged to amend the swap, solely for the purpose of transferring it to an affiliate, or a branch or other authorized form of establishment, located in any European Union member state or the United States, in connection with the entity's planning for or response to the event described in paragraph (h)(2)(iii) of this section, and the transferee is:
(A) A covered swap entity, or
(B) A covered swap entity's counterparty to the swap, and the counterparty represents to the covered swap entity that the counterparty performed the transfer in compliance with the requirements of paragraphs (h)(2)(i) and (ii) of this section;
(iii) The law of the European Union ceases to apply to the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, without conclusion of a Withdrawal Agreement between the United Kingdom and the European Union pursuant to Article 50(2);
(iv) The amendments do not modify any of the following: The payment amount calculation methods, the maturity date, or the notional amount of the swap;
(v) The amendments cause the transfer to take effect on or after the date of the event described in paragraph (h)(2)(iii) of this section transpires; and
(vi) The amendments cause the transfer to take effect by the later of:
(A) The date that is one year after the date of the event described in paragraph (h)(2)(iii) of this section; or
(B) Such other date permitted by transitional provisions under Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as amended.
For the reasons set forth in the Supplementary Information section, the Federal Deposit Insurance Corporation amends 12 CFR chapter III as follows:
7 U.S.C. 6s(e), 15 U.S.C. 78o–10(e), and 12 U.S.C. 1818 and 12 U.S.C. 1819(a)(Tenth), 12 U.S.C. 1813(q), 1818, 1819, and 3108.
(h)
(1) [Reserved]
(2) The non-cleared swap or non-cleared security based swap was amended under the following conditions:
(i) The swap was originally entered into, booked at, or otherwise held at, an entity located in the United Kingdom before the relevant compliance date established in paragraph (e) of this section and one party to the swap booked it at, or otherwise held it at, an entity (including a branch or other authorized form of establishment) located in the United Kingdom;
(ii) The entity in the United Kingdom subsequently arranged to amend the swap, solely for the purpose of transferring it to an affiliate, or a branch or other authorized form of establishment, located in any European Union member state or the United States, in connection with the entity's planning for or response to the event described in paragraph (h)(2)(iii) of this section, and the transferee is:
(A) A covered swap entity, or
(B) A covered swap entity's counterparty to the swap, and the counterparty represents to the covered swap entity that the counterparty performed the transfer in compliance with the requirements of paragraphs (h)(2)(i) and (ii) of this section; subject to the following conditions:
(iii) The law of the European Union ceases to apply [to] the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, without conclusion of a Withdrawal Agreement between the United Kingdom and the European Union pursuant to Article 50(2);
(iv) The amendments do not modify any of the following: The payment amount calculation methods, the maturity date, or the notional amount of the swap or non-cleared swap;
(v) The amendments cause the transfer to take effect on or after the date of the event described in paragraph (h)(2)(iii) of this section transpires; and
(vi) The amendments cause the transfer to take effect by the later of:
(A) The date that is one year after the date of the event described in paragraph (h)(2)(iii) of this section; or
(B) Such other date permitted by transitional provisions under Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as amended.
For the reasons set forth in the preamble, the Farm Credit Administration amends chapter VI of title 12, Code of Federal Regulations, as follows:
7 U.S.C. 6s(e), 15 U.S.C. 78o–10(e), 12 U.S.C. 2154, 12 U.S.C. 2243, 12 U.S.C. 2252, 12 U.S.C. 2279bb–1.
(h)
(1) [Reserved]
(2) The non-cleared swap or non-cleared security-based swap was amended under the following conditions:
(i) The swap was originally entered into before the relevant compliance date established in paragraph (e) of this section and one party to the swap booked it at, or otherwise held it at, an entity (including a branch or other authorized form of establishment) located in the United Kingdom;
(ii) The entity in the United Kingdom subsequently arranged to amend the swap, solely for the purpose of transferring it to an affiliate, or a branch or other authorized form of establishment, located in any European Union member state or the United States, in connection with the entity's planning for or response to the event described in paragraph (h)(2)(iii) of this section, and the transferee is:
(A) A covered swap entity, or
(B) A covered swap entity's counterparty to the swap, and the counterparty represents to the covered swap entity that the counterparty performed the transfer in compliance with the requirements of paragraphs (h)(2)(i) and (ii) of this section;
(iii) The law of the European Union ceases to apply to the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, without conclusion of a Withdrawal Agreement between the
(iv) The amendments do not modify any of the following: The payment amount calculation methods, the maturity date, or the notional amount of the swap;
(v) The amendments cause the transfer to take effect on or after the date of the event described in paragraph (h)(2)(iii) of this section transpires; and
(iv) The amendments cause the transfer to take effect by the later of:
(A) The date that is one year after the date of the event described in paragraph (h)(2)(iii) of this section; or
(B) Such other date permitted by transitional provisions under Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as amended.
For the reasons set forth in the preamble, the Federal Housing Finance Agency amends chapter XII of title 12, Code of Federal Regulations, as follows:
7 U.S.C. 6s(e), 15 U.S.C. 78o–10(e), 12 U.S.C. 4513, and 12 U.S.C. 4526(a).
(h)
(1) [Reserved]
(2) The non-cleared swap or non-cleared security based swap was amended under the following conditions:
(i) The swap was originally entered into before the relevant compliance date established in paragraph (e) of this section and one party to the swap booked it at, or otherwise held it at, an entity (including a branch or other authorized form of establishment) located in the United Kingdom;
(ii) The entity in the United Kingdom subsequently arranged to amend the swap, solely for the purpose of transferring it to an affiliate, or a branch or other authorized form of establishment, located in any European Union member state or the United States, in connection with the entity's planning for or response to the event described in paragraph (h)(2)(iii) of this section, and the transferee is:
(A) A covered swap entity, or
(B) A covered swap entity's counterparty to the swap, and the counterparty represents to the covered swap entity that the counterparty performed the transfer in compliance with the requirements of paragraphs (h)(2)(i) and (ii) of this section;
(iii) The law of the European Union ceases to apply to the United Kingdom pursuant to Article 50(3) of the Treaty on European Union, without conclusion of a Withdrawal Agreement between the United Kingdom and the European Union pursuant to Article 50(2);
(iv) The amendments do not modify any of the following: The payment amount calculation methods, the maturity date, or the notional amount of the swap;
(v) The amendments cause the transfer to take effect on or after the date of the event described in paragraph (h)(2)(iii) of this section transpires; and
(vi) The amendments cause the transfer to take effect by the later of:
(A) The date that is one year after the date of the event described in paragraph (h)(2)(iii) of this section; or
(B) Such other date permitted by transitional provisions under Article 35 of Commission Delegated Regulation (E.U.) No. 2016/2251, as amended.
Dated at McLean, VA, this 5th day of March 2019.