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Application of Dodd-Frank Swaps Regulations to Foreign Banks AIBA Quarterly Meeting September 20, 2012 1 David F. Freeman, Jr. Arnold & Porter LLP Washington, D.C. 202-942-5745 david.freeman@aporter.com
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General Requirements of Title VII of Dodd-Frank Act Registration of Swap Dealers and Major Swap Participants Centralized Execution, Clearing, Margin and Collateralization of Most Swaps Reporting of Swap Transactions Anti-Fraud Requirements Division of CFTC/SEC Jurisdiction 2
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Swap Dealer Regulatory Requirements Registration of Firm and Key Individuals Reporting of Transactions DCM/SEF Execution Clearing Margin Rules Internal Compliance & Controls Books & Records Disclosures 3
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Major Swap Participants Regulatory Requirements Registration Reporting Compliance Program/Internal Controls Anti-fraud/Anti-manipulation 4
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Cross-Border Issues DFA 722, 772: Coverage if Some Part of Transactions Occurs in U.S. A party or counterparty A guarantor Arranging or clearing CFTC Proposal on Cross-Border Issues, Extraterritorial Application and Substitute Compliance 77 Fed. Reg. 41214 (July 12, 2012) 5
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FX Issues and Potential Exemption Spot transactions Retail transactions Identified banking products Treasury exemption proposal for FX Swaps and Forwards, but not options – 76 Fed. Reg. 25774 (May 5, 2011) Issue on non-deliverable forwards 6
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Timing Swap dealer registration triggered by volume of new swaps after October 12, 2012, must register within 2 months after reaching threshold Major swap participant-registration Conforming Existing Swaps Reporting transactions Recordkeeping Compliance Program Disclosures and anti-fraud 7
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Interaction with Volcker Rule Volcker Rule § 619 of Dodd-Frank Act Restricts Proprietary Trading, with Some Exceptions Regulated Dealer Exemption Buy-and-hold Hedging US Govis, Munis, CRA investment Client transactions as agent Insurance Cash Management Foreign Banks Non-U.S. Offices in Transactions Not Involving U.S. Compliance Rule Proposal – Global Applicability 8
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DFA § 716 Restricts Access to Fed Discount Window Restricts Federal Insurance, Fed discount window access, other Federal funding/support for Swap Dealers, Major Swap Participants Push out exemption for FDIC-insured bank affiliates may not be available to foreign bank branches without FDIC insurance Broad-based emergency lending program exemption Proposed legislative fix 9
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