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OCC to consider maximum two-year transition period for “swaps pushout”

occ-seal-slideThe OCC issued guidance recently indicating that it will consider requests by banks for up to a two-year transition period to comply with the “swaps pushout” provision of Dodd-Frank.

Section 716 of Dodd-Frank prohibits banks designated as swap entities from using federal assistance, including federal deposit insurance or discount window loans, to support their swaps operations.

“Each request must be written and specify the transition period appropriate to the institution, up to a two-year transition period commencing from July 16,” the OCC guidance said.

The transition period would be determined by the designated regulator, as well as the SEC and CFTC. After consulting with both agencies, a federal banking regulator may extend the transition period for up to an additional year.

Additionally, the transition requests by banks must detail the plan that the institution plans to implement in order to comply with the new rules. Banks must also note how a transition period “would mitigate adverse effects on mortgage lending, small business lending, job creation and capital formation.”

Section 716 does not apply to insured depository institutions that limit their swap activities to “conforming swap activities.”

The OCC said that implementation of the rule without a transition period “would cause unwanted adverse consequences and that transition periods therefore are appropriate.”

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