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Conforming Amendments Proposed for Bank Swap Margin Rules

On February 5, the Prudential Regulators—the five federal banking regulators for swap dealers that are banks—proposed technical amendments to their margin rules for uncleared swaps. The amendments aim to harmonize the definition of Eligible Master Netting Agreement (EMNA) in the margin rules with recent changes made to the definition of “Qualifying Master Netting Agreement” (QMNA) in the capital and liquidity rules applicable to banks.

The proposed amendments make two key changes to the swap margin rules. First, the definition of an EMNA is changed so that any agreement that qualifies as a QMNA for capital purposes also will constitute an EMNA for margin rule purposes. Second, the amendments will allow parties to amend their master agreements to conform to banking law requirements without affecting the legacy status of swaps executed before the swap margin rule compliance date. (Without that second change, such an amendment would convert legacy trades into new trades subject to the margin rules.)

The Commodity Futures Trading Commission is likely adopt to similar conforming amendments to its swap margin rules for non-bank swap dealers in order to keep the playing field level for all swap dealers.

©2019 Katten Muchin Rosenman LLP


About this Author

Guy Dempsey Jr., Bank Regulations Legal Specialist, Katten Muchin

Guy C. Dempsey Jr. concentrates his practice on derivatives and structured products and on bank regulation. He advises clients on derivatives transactions of all types across all asset classes, as well as on the corporate governance, regulatory, collateral, compliance, insolvency and litigation issues associated with such products.

Much of Guy’s work involves helping bank and non-bank clients analyze the details and impact of the Dodd-Frank Act. He maintains deep knowledge of the banking laws and regulations relating to capital markets activities....