Derivatives contracts generally represent agreements between parties either to make or receive payments or to buy or sell an underlying asset on a certain date (or dates) in the future. Parties generally use derivative contracts to mitigate risk, although such transactions may serve other purposes.
Laws and Regulations
Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.
Part 349 Derivatives — Appendix A Margin and Capital Requirements for Covered Swap Entities
(also known as the Swap Margin Rule) establishes initial and variation margin requirements for covered swap entities
Part 324 — Capital Adequacy of FDIC-Supervised Institutions
includes provisions regarding the capital treatment of derivatives exposures for the purpose of risk-based capital requirements and the supplementary leverage ratio
Part 327 Subpart A — Appendix A — Description of Scorecard Measures — Assessments
includes provisions regarding the treatment of derivatives in deposit insurance assessments
Relevant Federal Register Notices incorporated into Parts 349, 324, and 327 that describe the basis and purpose of the rules and their revisions
Swap Margin Rule
Margin and Capital Requirements for Covered Swap Entities – TRIPRA Amendment; Final Rule: This final rule implements sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”). Sections 731 and 764 require the Agencies to adopt rules jointly to establish capital requirements and initial and variation margin requirements for such entities on all non-cleared swaps and non-cleared security-based swaps in order to offset the greater risk to such entities and the financial system arising from the use of swaps and security-based swaps that are not cleared.
Margin and Capital Requirements for Covered Swap Entities – EMNA Amendment; Final Rule: The final amendments to the Swap Margin Rule conform the definition of “Eligible Master Netting Agreement” to the definition of “Qualifying Master Netting Agreement” in the QFC Rules. The amendment to the Swap Margin Rule ensures that netting agreements of firms subject to the Swap Margin Rule are not excluded from the definition of “Eligible Master Netting Agreement” based solely on their compliance with the QFC Rules. The amendment also ensures that margin amounts required for non-cleared swaps covered by agreements that otherwise constitute Eligible Master Netting Agreements can continue to be calculated on a net portfolio basis, notwithstanding changes to those agreements that will be made in some instances by firms revising their netting agreements to achieve compliance with the QFC Rules. In addition, for any non-cleared swaps that were “entered into” before the compliance dates of the Swap Margin Rules—and which are accordingly grandfathered from application of the rule's margin requirements—the amendments state that any changes to netting agreements that are required to conform to the QFC Rules will not render grandfathered swaps covered by that netting agreement as “new” swaps subject to the Swap Margin Rule.
Margin and Capital Requirements for Covered Swap Entities – Brexit Amendment; Interim Final Rule: 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.
Margin and Capital Requirements for Covered Swap Entities – Amendments; Final Rule: The final rule changes requirements to the Swap Margin Rule that (1) permit swaps entered into prior to an applicable compliance date (legacy swaps) to retain their legacy status in the event that they are amended to replace an interbank offered rate (IBOR) or other discontinued rate, (2) modify initial margin requirements for non-cleared swaps between covered swap entities and their affiliates, (3) introduce an additional compliance date for initial margin requirements, (4) clarify the point in time at which trading documentation must be in place, (5) permit legacy swaps to retain their legacy status in the event that they are amended due to technical amendments, notional reductions, or portfolio compression exercises, (6) make technical changes to relocate the provision within the rule addressing amendments to legacy swaps that are made to comply with the qualified financial contract rules, and (7) address comments received in response to the agencies’ publication of the interim final rule dealing with Brexit-related issues.
Counterparty Credit Risk
Standardized Approach for Calculating the Exposure Amount of Derivative Contracts
implements the standardized approach for counterparty credit risk (SA-CCR), to calculate the exposure amount of derivative contracts for risk-based capital requirements and supplementary leverage ratio under Part 324 and for FDIC assessments under Part 327. Banking institutions are provided an option to adopt SA-CCR on the best effort basis effective March 31, 2020 (see
Notification Standardized Approach for Calculating the Exposure Amount of Derivative Contracts)
Revision to the Consolidated Reports of Condition and Income (Call Reports) Related to the Standardized Approach for Counterparty Credit Risk (SA-CCR)
Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe-and-sound operations.
- The Standardized Approach for Counterparty Credit Risk Community Bank Compliance Guide is intended to help community banking organizations understand the application of the standardized approach for counterparty credit risk (SA-CCR). The SA-CCR is available for use by the community banking organizations on a voluntary basis as a substitute for the current exposure method for calculating the exposure amount of derivative contracts. This guide summarizes the SA-CCR and therefore does not carry the effect of law or regulation. In addition to using this guide, community banking organizations that choose to adopt the SA-CCR methodology should review the regulations implementing SA-CCR.
- Financial Institution Letters
Interagency Supervisory Guidance on Counterparty Credit Risk Management
outlines sound practices for an effective counterparty credit risk management framework
Regulatory Capital Treatment of Certain Centrally-Cleared Derivative Contracts Under the FDIC's Capital Rule
provides supervisory guidance on the treatment of settled-to-market cleared derivatives
Advisory on Mandatory Clearing Requirements for Over-the-Counter Interest Rate and Credit Default Swap Contracts
summarizes the Commodity Futures Trading Commission (CFTC) mandatory clearing requirement that applies to any covered transaction entered into on or after June 10, 2013, unless an entity is eligible for a CFTC clearing exemption or Terrorism Risk Insurance Program Reauthorization Act exemption
Supplemental information and guidance related to safe and sound banking operations.
The Commodity Futures Trading Commission
is the primary regulator of the derivatives markets in the U.S. The Securities Exchange Commission
regulates the security-based derivatives markets. The following are key regulations issued by the CFTC and SEC that impact swaps and security-based derivatives and the markets in which they are traded
De Minimis Exception to the Swap Dealer Definition
amends the de minimis exception within the “swap dealer” definition in the CFTC’s regulations by setting the aggregate gross notional amount threshold for the de minimis exception at $8 billion in swap dealing activity entered into over the preceding 12 months
De Minimis Exception to the Swap Dealer Definition — Swaps Entered Into by Insured Depository Institutions in Connection With Loans to Customers
provides the de minimis exception within the “swap dealer” definition in the CFTC’s regulations by outlining whether a given swap has specified characteristics of swaps entered into by insured depository institutions in connection with loans to customers that excludes it from the de minimis calculation
Exclusion of Utility Operations-Related Swaps With Utility Special Entities From De Minimis Threshold for Swaps With Special Entities
permits a person to exclude utility operations-related swaps entered into with utility special entities in calculating the aggregate gross notional amount of swap positions, solely for purposes of the de minimis exception applicable to swaps with special entities
Clearing Requirement Determination Under Section 2(h) of the CEA
requires that certain classes of credit default swaps (CDS) and interest rate swaps be cleared by a derivatives clearing organization registered with the CFTC
Clearing Requirement Determination Under Section 2(h) of the Commodity Exchange Act for Interest Rate Swaps
expands the existing mandatory clearing requirement for interest rate swaps pursuant to the pertinent section of the Commodity Exchange Act (CEA)
Clearing Exemption for Certain Swaps Entered Into by Cooperatives; Harmonization of Compliance Obligations for Registered Investment Companies Required To Register as Commodity Pool Operators
allows cooperatives meeting certain conditions to not clear certain swaps that would otherwise be required to submit for clearing in accordance with section 2(h)(1) of the CEA
End-User Exception to the Clearing Requirement for Swaps
provides an exception to the clearing requirement available to swap counterparties meeting certain conditions under the Commodity Exchange Act, as amended by the Dodd-Frank Act
Derivatives Clearing Organization General Provisions and Core Principles
implements certain provisions of Title VII and Title VIII of the Dodd-Frank Act governing derivatives clearing organization activities
Derivatives Clearing Organizations and International Standards
provide additional standards for compliance with the derivatives clearing organization (DCO) core principles set forth in the CEA Act for systemically important DCOs (SIDCOs) and DCOs that elect to opt-in to the SIDCO regulatory requirements
Enhanced Risk Management Standards for SIDCOs
includes increased financial resources requirements for SIDCOs that are involved in activities with a more complex risk profile or that are systemically important, the exclusion of assessments in calculating available default resources, and enhanced system safeguards for business continuity and disaster recovery
Customer Clearing Documentation, Timing of Acceptance for Clearing, and Clearing Member Risk Management
describes documentation between a customer and a futures commission merchant (FCM) that clears on behalf of the customer; the timing of acceptance or rejection of trades for clearing; and the risk management procedures of FCMs, swap dealers, and major swap participants that are clearing members
Protection of Cleared Swaps Customer Contracts and Collateral; Conforming Amendments to the Commodity Broker Bankruptcy Provisions
details requirements imposed on FCMs and DCOs regarding the treatment of cleared swaps customer contracts (and related collateral), and making conforming amendments to bankruptcy provisions applicable to commodity brokers under the CEA
Implementation of section 4s(e) of the CEA
addresses the cross-border application of the CFTC's margin requirements for covered swaps entities uncleared swaps
Margin Requirements for Uncleared Swaps for Swap Dealers and Major Swap Participants
implements initial and variation margin requirements and provides exemptions of certain uncleared swaps with certain counterparties from margin requirements. A number of amendments to the initial final rule were since implemented by the CFTC
Protection of Collateral of Counterparties to Uncleared Swaps; Treatment of Securities in a Portfolio Margining Account in a Commodity Broker Bankruptcy
includes requirements for swap dealers and major swap participants with respect to the treatment of collateral posted by their counterparties to margin, guarantee, or secure uncleared swaps. Additional revisions ensure that, for purposes of subchapter IV of chapter 7 of the Bankruptcy Code, securities held in a portfolio margining account that is a futures account or a Cleared Swaps Customer Account constitute “customer property;” and owners of such account constitute “customers”
Swap Data Recordkeeping and Reporting Requirements
provides swap data recordkeeping and reporting requirements under the CEA
Further Definition of “Swap,” “Security-Based Swap,” and “Security-Based Swap Agreement”; Mixed Swaps; Security-Based Swap Agreement Recordkeeping
provides jointly issued rules jointly issued by the CFTC and the SEC, in consultation with the Board of Governors of the Federal Reserve System, under the CEA and the Securities Exchange Act of 1934 to further define the terms “swap,” “security-based swap,” and “security-based swap agreement”
Informational videos and recordings of prior webcasts and teleconferences.
Banker Webinar: Standardized Approach for Counterparty Credit Risk (SA-CCR) (Run Time: 54:14)
This banker webinar addresses the New Standardized Approach for Calculating the Exposure Amount of Derivative Contracts.
Interagency Webinar: Revisions to the Framework for Margin Requirements for Non-Centrally Cleared Derivatives
through Ask The Fed (which requires registration to access)