Swap Margin Rule amendments finalized

The Federal Reserve Board, Farm Credit Administration, FDIC, FHFA, and OCC have finalized changes to their swap margin rule to facilitate the implementation of prudent risk management strategies at banks and other entities with significant swap activities.

Under the interim final rule, entities that are part of the same banking organization generally will no longer be required to hold a specific amount of initial margin for uncleared swaps with each other, known as inter-affiliate swaps. Inter-affiliate swaps typically are used for internal risk management purposes by transferring risk to a centralized risk management function within the firm. The rule will give firms additional flexibility to allocate collateral internally and support prudent risk management and safety and soundness. Inter-affiliate swaps will remain subject to variation margin requirements, and initial margin will still be required if a depository institution's total exposure to all affiliates exceeds 15 percent of its Tier 1 capital.

The interim final rule will become effective 61 days after it is published in the Federal Register. The rule includes a phased compliance schedule. Comments on the rule will be accepted for 60 days following publication.

PUBLICATION UPDATE: Published July 1, 2020, at 85 FR 39464, with a 61-day comment period ending 8/31/2020, and an effective date of 9/1/2020. Accompanied at publication by a separate final rule at 85 FR 39754, adjusting the compliance dates and making certain other technical changes. This rule is effective 8/31/2020.

• Federal Reserve press release