Agencies Propose Rule to Amend the Swap Margin Rule — 2019-10-28

Five federal agencies today announced a proposal to change the swap margin rules to facilitate the implementation of prudent risk management strategies at certain banks and swap entities. The swap margin rule would no longer require swap entities to hold initial margin for uncleared swaps with affiliates. However, inter-affiliate transactions would still be subject to variation margin requirements. Swap entities regulated by the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Federal Reserve Board also would be subject to requirements under sections 23A and 23B of the Federal Reserve Act. The Federal Reserve Board continues to work on proposed amendments to Regulation W that would, among other things, clarify the treatment of bank-affiliate derivatives under sections 23A and 23B. Inter-affiliate swaps typically are used for internal risk management purposes, by transferring risk to a centralized risk management function within the firm.