The Board of Governors of the Federal Reserve System ("Board") on December 24, 2013, issued final rules ("Final Rules") to include the uninsured US branches and agencies of foreign banks in the definition of "insured depository institutions" for the purposes of Section 716 of the Dodd-Frank Act, the so-called push-out rule. Section 716 prohibits an insured depository institution that is a registered swaps dealer or registered security-based swaps dealer from access to the Federal Reserve Bank discount window and any emergency funding facility and to Federal Deposit Insurance Corporation ("FDIC") insurance or guarantee. Section 716, however, permits an insured depository institution to continue to access Reserve Bank credit facilities and to obtain or retain FDIC deposit insurance or guarantee if the depository institution pushes out its swap-dealing activities to an affiliate. Section 716 became effective July 16, 2013, but allows insured depository institutions to request a transition period to push out their swaps activities. The transition period extends for an initial two years from the date an institution becomes a registered swaps dealer or registered security-based swaps dealer and upon request may be extended for an additional year.
Because the Final Rules include uninsured US branches and agencies in the definition of insured depository institution, a foreign bank that is or becomes a registered swaps dealer or registered security-based swaps dealer may continue to access the discount window through its US branch or agency so long as the foreign bank pushes its swaps activities covered by Section 716 out of the branch or agency and into an affiliate.
The Final Rules, like the Board's interim rules issued in June 2013, also extend the transition period to the US branches and agencies of foreign banks. A foreign bank should file a request for a transition period to push swaps activities out of its US branches or agencies upon registering as a swaps dealer or security-based swaps dealer. Requests should be made to the primary US banking supervisor of the US branch or agency (i.e., the Office of the Comptroller of the Currency for federal uninsured branches and agencies, the Federal Reserve for state uninsured branches and agencies and the FDIC for all insured branches or agencies).
Our attached Client Alert on the interim rules discusses where and when to make transition period requests and what should be included in the filing.
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