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The OCC, Board, FDIC, FCA, and FHFA (each an Agency and, collectively, the Agencies) are adopting and invite comment on an interim final rule amending the Agencies’ regulations that require swap dealers and security-based swap dealers under the Agencies’ respective jurisdictions to exchange margin with their counterparties for swaps that are not centrally cleared (Swap Margin Rule). The Swap Margin Rule takes effect under a phased compliance schedule stretching from 2016 through 2020, and the dealers covered by them continue to hold swaps in their portfolios that were entered into before the effective dates of the rule. These swaps are grandfathered from the Swap Margin Rule’s requirements until they expire according to their terms.

There are currently banking entities located within the United Kingdom (UK) that conduct swap dealing activities subject to the Swap Margin Rule. The UK has provided formal notice of its intention to withdraw from the European Union (EU) on March 29, 2019, absent a negotiated agreement that would allow these swap dealers located in the UK to continue to be authorized to provide full-scope financial services to swap counterparties located in the EU.

The Agencies’ interim final rule is designed to address the scenario likely to ensue, whereby swap dealers located in the UK might choose to transfer their existing swap portfolios that face counterparties located in the EU over to an affiliate or other related establishment located within the EU. Such 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 swaps that are grandfathered from the rule. Accordingly, the transferred swaps would continue to be grandfathered under the Swap Margin Rule as they are applied to the EU establishments of the swap dealers receiving the transferred swap portfolios.