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Application of Dodd-Frank Swaps Regulations to Foreign Banks

Application of Dodd-Frank Swaps Regulations to Foreign Banks. David F. Freeman, Jr. Arnold & Porter LLP Washington, D.C. 202-942-5745 david.freeman@aporter.com. AIBA Quarterly Meeting September 20, 2012. General Requirements of Title VII of Dodd-Frank Act .

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Application of Dodd-Frank Swaps Regulations to Foreign Banks

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  1. Application of Dodd-Frank Swaps Regulations to Foreign Banks David F. Freeman, Jr.Arnold & Porter LLP Washington, D.C. 202-942-5745 david.freeman@aporter.com AIBA Quarterly Meeting September 20, 2012

  2. 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

  3. 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

  4. Major Swap Participants Regulatory Requirements • Registration • Reporting • Compliance Program/Internal Controls • Anti-fraud/Anti-manipulation

  5. 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)

  6. 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

  7. 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

  8. 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

  9. 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

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