Rules and Regulations Federal Register Vol

50605

Rules and Regulations Federal Register Vol. 81, No. 148

Tuesday, August 2, 2016

This section of the FEDERAL REGISTER adopting exemptions from the initial 1501 Farm Credit Drive, McLean, VA contains regulatory documents having general and variation margin requirements 22102–5090. applicability and legal effect, most of which published by the Agencies in November FHFA: George Sacco, Senior Financial are keyed to and codified in the Code of 2015 pursuant to sections 731 and 764 Analyst, Division of Housing Mission Federal Regulations, which is published under of the Dodd-Frank Wall Street Reform and Goals, (202) 649–3276, 50 titles pursuant to 44 U.S.C. 1510. and Consumer Protection Act (the [email protected], or Peggy K. The Code of Federal Regulations is sold by ‘‘Dodd-Frank Act’’ or the ‘‘Act’’). Balsawer, Associate General Counsel, the Superintendent of Documents. Prices of Pursuant to Title III of the Terrorism Office of General Counsel, (202) 649– new books are listed in the first FEDERAL Risk Insurance Program Reauthorization 3060, [email protected], Federal REGISTER issue of each week. Act of 2015 (‘‘TRIPRA’’), this final rule Housing Finance Agency, Constitution exempts certain non-cleared swaps and Center, 400 7th St. SW., Washington, DC non-cleared security-based swaps with 20219. The telephone number for the DEPARTMENT OF THE TREASURY certain financial and non-financial end Telecommunications Device for the users that qualify for an exception or Hearing Impaired is (800) 877–8339. Office of the Comptroller of the exemption from clearing. Currency SUPPLEMENTARY INFORMATION: DATES: This final rule is effective I. Background 12 CFR Part 45 October 1, 2016. FOR FURTHER INFORMATION CONTACT: The Dodd-Frank Act was enacted on [Docket No. OCC–2015–0023] OCC: Ang Middleton, Risk Specialist, July 21, 2010.1 Title VII of the Dodd- Financial Markets Group, (202) 649– Frank Act established a comprehensive RIN 1557–AD00 7138, or Carl Kaminski, Special new regulatory framework for FEDERAL RESERVE SYSTEM Counsel, Legislative and Regulatory derivatives, which the Act generally Activities Division, (202) 649–5490, for characterizes as ‘‘swaps’’ and ‘‘security- 2 12 CFR Part 237 persons who are deaf or hard of hearing, based swaps.’’ As part of this new TTY (202) 649–5597, Office of the regulatory framework, sections 731 and [Docket No. R–1415] Comptroller of the Currency, 400 7th 764 of the Dodd-Frank Act added, respectively, a new section 4s to the RIN 7100–AD74 Street SW., Washington, DC 20219. Board: Sean D. Campbell, Associate Commodity Exchange Act of 1936 (the FEDERAL DEPOSIT INSURANCE Director, (202) 452–3760, Anna M. ‘‘Commodity Exchange Act’’), and a new CORPORATION Harrington, Senior Supervisory section 15F to the Securities Exchange Financial Analyst, (202) 452–6406, or Act of 1934 (the ‘‘Securities Exchange 12 CFR Part 349 Lesley Chao, Senior Supervisory Act’’), which require registration with Financial Analyst, (202) 974–7063, the U.S. Commodity Futures Trading RIN 3064–AE21 Division of Banking Supervision and Commission (the ‘‘CFTC’’) of swap Regulation; Victoria M. Szybillo, dealers and major swap participants and FARM CREDIT ADMINISTRATION Counsel, (202) 475–6325, or Adam with the U.S. Securities and Exchange Cohen, Counsel, (202) 912–4658, Legal Commission (the ‘‘SEC’’) of security- 12 CFR Part 624 Division, Board of Governors of the based swap dealers and major security- RIN 3052–AC69 Federal Reserve System, 20th and C based swap participants.3 These Streets NW., Washington, DC 20551. FEDERAL HOUSING FINANCE FDIC: Karl R. Reitz, Corporate Expert, 1 Public Law 111–203, 124 Stat. 1376 (2010). AGENCY Capital Markets, [email protected]; 2 ‘‘Swaps’’ are defined in section 721 of the Dodd- Michael E. Spencer, Chief, Capital Frank Act to include interest rate swaps, commodity-based swaps, equity swaps and credit 12 CFR Part 1221 Markets Strategy Section, michspencer@ default swaps. ‘‘Security-based swaps’’ are defined fdic.gov, Division of Risk Management in section 761 of the Dodd-Frank Act to include a RIN 2590–AA45 Supervision, (202) 898–6888; Thomas F. swap based on a single security or loan or on a Hearn, Counsel, [email protected], narrow-based security index. See 7 U.S.C. 1a(47); 15 Margin and Capital Requirements for U.S.C. 78c(a)(68). Covered Swap Entities (202) 898–6967, or Catherine Topping, 3 See 7 U.S.C. 6s; 15 U.S.C. 78o–10. Section 731 Counsel, [email protected], (202) 898– of the Dodd-Frank Act requires swap dealers and AGENCY: Office of the Comptroller of the 3975, Legal Division, Federal Deposit major swap participants to register with the CFTC, Currency, Treasury (‘‘OCC’’); Board of Insurance Corporation, 550 17th Street which is vested with primary responsibility for the oversight of the swaps market under Title VII of the Governors of the Federal Reserve NW., Washington, DC 20429. Dodd-Frank Act. Section 764 of the Dodd-Frank Act System (‘‘Board’’); Federal Deposit FCA: J.C. Floyd, Associate Director, requires security-based swap dealers and major Insurance Corporation (‘‘FDIC’’); Farm Finance & Capital Markets Team, security-based swap participants to register with the Credit Administration (‘‘FCA’’); and the Timothy T. Nerdahl, Senior Policy SEC, which is vested with primary responsibility for the oversight of the security-based swaps market Federal Housing Finance Agency Analyst—Capital Markets, Jeremy R. under Title VII of the Dodd-Frank Act. Section (‘‘FHFA’’). Edelstein, Senior Policy Analyst, Office 712(d)(1) of the Dodd-Frank Act requires the CFTC ACTION: Final rule. of Regulatory Policy, (703) 883–4414, and SEC to issue joint rules further defining the TTY (703) 883–4056, or Richard A. terms swap, security-based swap, swap dealer, SUMMARY: major swap participant, security-based swap dealer, The OCC, Board, FDIC, FCA, Katz, Senior Counsel, Office of General and major security-based swap participant. The and FHFA (each an ‘‘Agency’’ and, Counsel, (703) 883–4020, TTY (703) CFTC and SEC issued final joint rulemakings with collectively, the ‘‘Agencies’’) are 883–4056, Farm Credit Administration, Continued

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registrants are collectively referred to in security-based swap might not be collect initial or variation margin at this preamble as ‘‘swap entities.’’ cleared either because it is not subject such times and in such forms and Sections 731 and 764 of the Dodd- to the mandatory clearing requirement amounts (if any) as the covered swap Frank Act require the Agencies to adopt or because one of the parties to the swap entity determines appropriate in its joint rules that apply to all swap entities is eligible for, and elects to use, an overall credit risk management of the for which any one of the Agencies is the exception or exemption from the covered swap entity’s exposure to the prudential regulator,4 imposing capital mandatory clearing requirement. Such a customer.11 requirements and initial and variation swap or security-based swap is ‘‘non- On January 12, 2015, President margin requirements on all swaps and cleared’’ for purposes of the capital and Obama signed TRIPRA into law.12 Title security-based swaps not cleared by a margin requirements established under III of TRIPRA, the ‘‘Business Risk registered derivatives clearing sections 731 and 764 of the Dodd-Frank Mitigation and Price Stabilization Act of organization or clearing agency.5 After a Act. 2015,’’ amends the statutory provisions rulemaking process that began in 2011, Sections 731 and 764 direct the added by the Dodd-Frank Act relating to the Agencies published a joint final rule Agencies to impose initial and variation margin requirements for non-cleared to implement these Dodd-Frank Act margin requirements on all non-cleared swaps and non-cleared security-based requirements on November 30, 2015 swaps and non-cleared security-based swaps. Specifically, section 302 of (the ‘‘joint final rule’’).6 swaps. The joint final rule takes into TRIPRA amends sections 731 and 764 of The capital and margin requirements account the risk posed by a covered the Dodd-Frank Act to provide that the under sections 731 and 764 of the Dodd- swap entity’s counterparties in initial and variation margin Frank Act apply to non-cleared swaps establishing the minimum amount of requirements do not apply to certain and non-cleared security-based swaps initial and variation margin that the transactions of specified counterparties and complement other provisions of the covered swap entity must exchange that would qualify for an exception or Dodd-Frank Act that require the CFTC with its counterparties.9 In exemption from clearing, as explained and SEC to make determinations as to implementing this risk-based approach, more fully below. Qualifying non- whether certain swaps or security-based the joint final rule distinguishes among cleared swaps and non-cleared security- swaps, or a group, category, or class of four separate types of swap based swaps of entities covered by such transactions, should be required to counterparties: (1) Counterparties that section 302 of TRIPRA are not subject to be cleared.7 If the CFTC or SEC has are themselves swap entities; (2) the Agencies’ joint final rule. made such a determination, it is counterparties that are financial end Section 303 of TRIPRA requires the generally unlawful for any person to users with a material swaps exposure; Agencies to implement the provisions of engage in such a swap or security-based (3) counterparties that are financial end section 302 by promulgating an interim swap unless the transaction is submitted users without a material swaps final rule pursuant to which public to a derivatives clearing organization or exposure, and (4) other counterparties, comment is sought before a final rule is clearing agency, as applicable, for including non-financial end users, issued. On November 30, 2015, the clearing. sovereigns, and multilateral Agencies published and sought The clearing requirements, however, development banks.10 The joint final comment on an interim final rule, do not apply to an entity that is not a rule makes a covered swap entity’s which added § l.1(d) to the joint final financial entity, is using a swap or collection of margin from these ‘‘other rule.13 The Agencies are adopting as a security-based swap to hedge or mitigate counterparties,’’ including commercial final rule without change the interim commercial risk, and notifies the CFTC end users, subject to the judgment of the final rule that went into effect on April or the SEC, in a manner set forth by the covered swap entity. In particular, a 1, 2016. appropriate Commission, how it covered swap entity is not required to II. Summary of Public Comments on generally meets its financial collect initial and variation margin from Matters Raised in the Interim Final obligations.8 Thus, a particular swap or these ‘‘other counterparties’’ as a matter Rule of course; a covered swap entity should respect to these definitions in May 2012 and August Three banking organizations, two 2012, respectively. See 77 FR 30596 (May 23, 2012); similar exemptive authority under section 36(c) of individuals, two trade associations, and 77 FR 39626 (July 5, 2012) (correction of footnote the Securities Exchange Act. 15 U.S.C. 78mm(c). one nonprofit finance cooperative in the Supplementary Information accompanying 9 Each Agency has codified its rule within its the rule); and 77 FR 48207 (August 13, 2012). 17 submitted comments in response to the respective title of the Code of Federal Regulations. CFR part 1; 17 CFR parts 230, 240 and 241. interim final rule.14 Four of the Specifically, the Agencies codified the rules as 4 Section 1a(39) of the Commodity Exchange Act follows: 12 CFR part 45 (OCC); 12 CFR part 237 (the commenters expressed strong support defines the term ‘‘prudential regulator’’ for Board); 12 CFR part 349 (FDIC); 12 CFR part 624 for the approach taken in the interim purposes of the capital and margin requirements (FCA); and 12 CFR part 1221 (FHFA). applicable to swap dealers, major swap final rule. 10 See § l.2 of the joint final rule for the various participants, security-based swap dealers and major Comments were received from two definitions that identify these four types of swaps security-based swap participants. 7 U.S.C. 1a(39). public sector entities organized under counterparties. The terms ‘‘non-financial end user’’ 5 See 7 U.S.C. 6s(e)(2)(A); 15 U.S.C. 78o– and ‘‘commercial end user’’ are used foreign laws whose obligations are 10(e)(2)(A). interchangeably throughout this preamble. guaranteed by foreign governments 6 80 FR 74840 (November 30, 2015). Although the term ‘‘commercial end user’’ is not (‘‘foreign public sector entities’’). These 7 7 U.S.C. 2(h); 15 U.S.C. 78c–3. The Commodity defined in the Dodd-Frank Act, it is used in this Exchange Act and the Securities Exchange Act set preamble to mean a company that is eligible for the 11 out standards that the CFTC and the SEC, exception to the mandatory clearing requirement for See §§ l.3(d) and l.4(c) of the joint final rule. respectively, are required to apply when making swaps under section 2(h)(7)(A) of the Commodity 12 Public Law 114–1, 129 Stat. 3 (2015). determinations about clearing, which generally Exchange Act and section 3C(g)(1) of the Securities 13 80 FR 74916 (November 30, 2015) (the ‘‘interim address whether a swap or security-based swap is Exchange Act, respectively. This exception is final rule’’). sufficiently standardized to be cleared. 7 U.S.C. generally available to a person that (1) is not a 14 The Agencies carefully considered all 2(h)(2)(D); 15 U.S.C. 78c–3(b)(4). financial entity, (2) is using the swap to hedge or comments received on the interim final rule. In 8 See 7 U.S.C. 2(h)(7); 15 U.S.C. 78c–3(g). Further, mitigate commercial risk, and (3) has notified the addition, representatives of the FDIC and FCA had the CFTC has authority to exempt swaps from the CFTC or SEC how it generally meets its financial a telephone call with one commenter after the clearing requirement. 7 U.S.C. 6(c)(1). Pursuant to obligations with respect to non-cleared swaps or comment period closed. Comments received on the this authority, the CFTC has provided an exemption security-based swaps, respectively. See 7 U.S.C. interim final rule, as well as a summary of the call from clearing to certain cooperatives that are 2(h)(7)(A) and 15 U.S.C. 78c–3(g)(1); see also 80 FR with this commenter, are available on the financial entities. See 17 CFR 50.51. The SEC has 74848 note 70. applicable Agencies’ respective public Web sites.

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commenters argued that, even though file with the CFTC a signed affidavit 2(h)(7)(A) of the Commodity Exchange they are not included among the type of stating that all swaps that are exempt Act; entities expressly covered by section from the joint final rule’s margin (2) A cooperative entity that qualifies 302 of TRIPRA, foreign public sector requirements because of section 302 of for an exemption from the clearing entities should still not be subject to the TRIPRA do not have a flip clause or any requirements issued under section joint final rule because the CFTC has other clause that can be reasonably 4(c)(1) of the Commodity Exchange Act; determined that these types of entities classified as a walk-away provision or or are not subject to the mandate to clear RAC provision. Finally, the commenter (3) A treasury affiliate that satisfies swaps that are otherwise required to be recommended that the prudential the criteria for an exception from cleared. regulators should obligate a covered clearing in section 2(h)(7)(D) of the The Agencies are not providing the swap entity to post initial margin and Commodity Exchange Act. relief requested by these commenters variation margin to its guarantor or Similarly, section 302(b) of TRIPRA since the purpose of this final rule is to hedging affiliate against a swap that amends section 764 of the Dodd-Frank incorporate the terms of section 302 of contains a ‘‘flip clause’’ or any other Act so that initial and variation margin TRIPRA, and the treatment of foreign clause that can be reasonably classified requirements will not apply to a public sector entities is not specified by as a walk-away provision. The Agencies security-based swap in which a section 302. Even though the CFTC has are declining to make the requested counterparty (to a covered swap entity) interpreted the Commodity Exchange changes, since the purpose of the final is: Act to exclude certain foreign public rule is to incorporate the terms of (1) A non-financial entity (including a sector entities from the clearing section 302 of TRIPRA, and the small financial institution) that qualifies mandate that the Dodd-Frank Act added treatment of flip clauses or RAC for the clearing exception under section to the Commodity Exchange Act, such provisions is not specified by section 3C(g)(1) of the Securities Exchange Act; entities are not addressed in section 302 302. or of TRIPRA.15 The Agencies received one request for (2) A treasury affiliate that satisfies One commenter asked for clarification clarification with respect to paragraph the criteria for an exception from that swap transaction documentation (1)(xi) of the definition of ‘‘financial end clearing in section 3C(g)(4) of the that contains ‘‘flip clauses’’ or ‘‘rating user’’ set forth in the joint final rule. Securities Exchange Act. agency condition’’ (‘‘RAC’’) provisions Specifically, the commenter asked the Below is a discussion of each type of cannot qualify for an exemption from Agencies to clarify and consider the use entity covered by section 302 of TRIPRA the Agencies’ joint final rule or this final of certain terms and phrases (i.e., as well as a discussion of how related 16 rule. Specifically, the commenter ‘‘investing or trading,’’ ‘‘other assets,’’ reporting requirements can be satisfied. stated that Title III of TRIPRA does not and ‘‘primarily’’) in this prong of the exempt a swap with a flip clause or RAC financial end user definition. While § l A. Non-Financial Entities provision from the margin requirements .1(d), as adopted in this final rule, works TRIPRA provides that the initial and of the joint final rule. The commenter in conjunction with the joint final rule, variation margin requirements of the further requested that an entity covered the Agencies find this comment does joint final rule shall not apply to a non- by section 302 of TRIPRA be required to not relate to § l.1(d) and thus is outside cleared swap in which a counterparty of the scope of the interim final rule, qualifies for an exception under section 15 Alternatively, each of these two foreign public which implements section 302 of 2(h)(7)(A) of the Commodity Exchange sector entities sought clarification that it meets the TRIPRA. definition of ‘‘sovereign entity’’ or ‘‘multilateral Act or a non-cleared security-based development bank’’ under the joint final rule. The The Agencies also received four swap in which a counterparty qualifies joint final rule expressly excludes from the comments in support of the treatment of for an exception under section 3C(g)(1) definition of ‘‘financial end user’’ an entity that certain cooperative entities under the of the Securities Exchange Act.17 meets the definition of ‘‘sovereign entity’’ or interim final rule. One comment was ‘‘multilateral development bank.’’ Whether an Section 2(h)(7)(A) and section 3C(g)(1) entity meets the definition of ‘‘sovereign entity’’ or received from an individual expressing except from clearing swaps or security- ‘‘multilateral development bank’’ depends on facts his support for the approach taken in based swaps where one of the and circumstances that may vary from entity to the interim final rule. counterparties: (1) Is not a financial entity and is outside the scope of this rulemaking. The Agencies note that they considered similar III. Description of the Final Rule entity; (2) is using the swap to hedge or mitigate commercial risk; and (3) comments received on the joint final rule and The interim final rule adopted § l determined not to exclude entities guaranteed by a notifies the CFTC or SEC how it foreign sovereign from the definition of financial .1(d) to implement section 302 of generally meets its financial obligations end user. See 80 FR 74,840, 74,856 (The Agencies TRIPRA. The final rule makes no associated with entering into non- explained: ‘‘[a]n entity guaranteed by a sovereign l changes to § .1(d). cleared swaps or non-cleared security- entity is not explicitly excluded from the definition TRIPRA provides that the initial and of financial end user in the final rule, unless that based swaps. A number of different variation margin requirements in entity qualifies as a central government agency, types of counterparties may qualify for department, or central bank. The existence of a sections 731 and 764 of the Dodd-Frank an exception from clearing under government guarantee does not in and of itself Act do not apply to qualifying non- section 2(h)(7)(A) and section 3C(g)(1), exclude the entity from the definition of financial cleared swaps and non-cleared security- end user.’’) including non-financial end users and based swaps of certain categories of 16 The commenter has previously referred to a small banks, savings associations, Farm counterparties. In particular, section description of a ‘‘flip clause’’ as a contractual Credit System institutions, and credit provision in a swap to which a special purpose 302(a) of TRIPRA amends section 731 of unions. In addition, captive finance vehicle (‘‘SPV’’) is a party and under which the the Dodd-Frank Act so that initial and payments owed by the SPV to a swap provider are companies qualify for an exception from variation margin requirements will not at least pari passu with interest of the senior most clearing swaps under section apply to a swap in which a counterparty class of debt issued by the structured finance 2(h)(7)(A).18 vehicle. In the description that the commenter (to a covered swap entity) is: referred to, a ‘‘flip clause’’ was described as a (1) A non-financial entity (including a provision that provides that should the swap 17 See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c–3(g)(1). provider be the defaulting party to a swap, such small financial institution and a captive 18 There is no corresponding exclusion from default causes the swap provider to ‘‘flip’’ to a more finance company) that qualifies for the clearing security-based swaps under section junior position in the priority of payments. clearing exception under section Continued

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Non-financial end users. A cleared security-based swaps with those final rule, non-cleared swaps and non- counterparty that is not a financial entities would be eligible for the cleared security-based swaps of a entity 19 and that is using swaps to exemption in the joint final rule treasury affiliate acting as agent that met hedge or mitigate commercial risk pursuant to § l.1(d) as required under the requirements for a clearing generally would qualify for an exception TRIPRA, provided they met the other exception would also be eligible for an from clearing under section 2(h)(7)(A) or requirements for the clearing exemption pursuant to § l.1(d) from section 3C(g)(1) and thus from the exemption.22 the joint final rule. requirements of the joint final rule for Captive finance companies. Section The Consolidated Appropriations Act, non-cleared swaps and non-cleared 2(h)(7)(C) also provides that the 2016 (‘‘Appropriations Act of 2016’’), security-based swaps pursuant to § l definition of ‘‘financial entity’’ does not which was enacted on December 18, .1(d). include an entity whose primary 2015, amended section 2(h)(7)(D) of the Small banks, savings associations, business is providing financing and uses Commodity Exchange Act and section Farm Credit System institutions, and derivatives for the purposes of hedging 3C(g)(4) of the Securities Exchange credit unions. Section 2(h)(7)(C)(ii) underlying commercial risks relating to Act.25 Specifically, section 705 of the provides that the CFTC shall consider interest rate and foreign exchange Appropriations Act of 2016 removed the whether to exempt small banks, savings exposures, 90 percent or more of which requirement that treasury affiliates must associations, Farm Credit System arise from financing that facilitates the act on behalf of a person and as an agent institutions, and credit unions with total purchase or lease of products, 90 in order to avail themselves of the assets of $10 billion or less from the percent or more of which are clearing exception. The Appropriations definition of financial entity. Pursuant manufactured by the parent company or Act of 2016 also included certain to this authority, the CFTC has another subsidiary of the parent conditions on the application of the exempted small banks, savings company (‘‘captive finance treasury affiliate exception 26 and associations, Farm Credit System company’’).23 These entities can qualify imposed certain limitations on the types institutions, and credit unions with total for a clearing exception when they are of entities that can qualify for the assets of $10 billion or less from the using swaps to hedge or mitigate exception.27 definition of ‘‘financial entity,’’ thereby commercial risk and thus non-cleared permitting these institutions to avail swaps of these entities would be eligible section 3(c)(1) or 3(c)(7) of that Act, a commodity themselves of the clearing exception pool, or a bank holding company with over $50 for the exemption in the joint final rule billion in consolidated assets. when they are using swaps to hedge or pursuant to § __.1(d). 25 20 Pub. L. 114–113, 129 Stat. 2242 (2015). mitigate risk. As a result, non-cleared 26 B. Treasury Affiliates Under section 705 of the Appropriations Act of swaps used by these small financial 2016, a treasury affiliate may qualify for an institutions to hedge or mitigate Section 302 of TRIPRA provides that exception from the clearing requirements only if the commercial risk would also qualify for the initial and variation margin affiliate (i) enters into the swap to hedge or mitigate the commercial risk of the person or other affiliate an exemption from the initial and requirements shall not apply to a non- of the person that is not a financial entity, and the variation margin requirements of the cleared swap or non-cleared security- commercial risk that the affiliate is hedging or joint final rule pursuant to § l.1(d). based swap in which a counterparty mitigating has been transferred to the affiliate; (ii) Similarly, section 3C(g) provides that satisfies the criteria in section 2(h)(7)(D) is directly and wholly-owned by another affiliate the SEC shall consider whether to qualified for the exception under section of the Commodity Exchange Act or 2(h)(7)(D)(i) of the Commodity Exchange Act or an exempt small banks, savings section 3C(g)(4) of the Securities entity that is not a financial entity; (iii) is not associations, Farm Credit System Exchange Act. At the time the interim indirectly majority-owned by a financial entity; (iv) institutions, and credit unions with total is not ultimately owned by a parent company that final rule was published, these sections is a financial entity; and (v) does not provide any assets of $10 billion or less from the provided that, where a person qualifies services, financial or otherwise, to any affiliate that 21 definition of ‘‘financial entity.’’ If the for an exception from the clearing is a nonbank financial company supervised by the SEC were to implement an exemption requirements, an affiliate of that person Board of Governors (as defined under section 102 for such entities from clearing, non- of the Financial Stability Act of 2010). With respect (including an affiliate predominantly to the treasury affiliate exception, the affiliate may engaged in providing financing for the not enter into any swap other than for the purpose 3C(g)(1) of the Securities Exchange Act for captive purchase of the merchandise or of hedging or mitigating commercial risk; and finance companies. Similarly, with respect to manufactured goods of the person) neither the affiliate nor any person affiliated with financial cooperatives, TRIPRA exempts such the affiliate that is not a financial entity may enter entities from exchanging initial and variation would have qualified for the exception into a swap with or on behalf of any affiliate that margin under the joint final rule on all swaps that as well, but only if the affiliate is acting is a financial entity or otherwise assume, net, are subject to the exemption from clearing provided on behalf of the person and as an agent combine, or consolidate the risk of swaps entered by the CFTC. See 7 U.S.C. 6(c)(1). There is no and uses the swap to hedge or mitigate into by any such financial entity, except one that corresponding exclusion under the Securities is an affiliate that qualifies for the exception. Exchange Act. the commercial risk of the person or Further, any swap entered into by an affiliate that 19 See 7 U.S.C. 2(h)(7)(A); 15 U.S.C. 78c–3(g)(1); other affiliate of the person that is not qualifies for the exception shall be subject to a 17 CFR 50.50. A ‘‘financial entity’’ is defined to a financial entity (‘‘treasury affiliate centralized risk management program of the mean (i) a swap dealer; (ii) a security-based swap acting as agent’’).24 affiliate, which is reasonably designed both to dealer; (iii) a major swap participant; (iv) a major Under the interim monitor and manage the risks associated with the security-based swap participant; (v) a commodity swap and to identify each of the affiliates on whose pool; (vi) a private fund as defined in section 202(a) 22 On December 21, 2010, the SEC proposed to behalf a swap was entered into. See Pub. L. 114– of the Investment Advisers Act of 1940; (vii) an exempt security-based swaps used by small 113, 129 Stat. 2242 (2015). employee benefit plan as defined in sections 3(3) depository institutions, small Farm Credit System 27 For example, the treasury affiliate exception and 3(32) of the Employment Retirement Income institutions, and small credit unions with total will not apply if the affiliate is a swap dealer, a Security Act of 1974; and (viii) a person assets of $10 billion or less from clearing. See 75 security-based swap dealer, a major swap predominantly engaged in activities that are in the FR 79992 (December 21, 2010). participant, a major security-based swap business of banking, or in activities that are 23 See 7 U.S.C. 2(h)(7)(C)(iii). participant, a commodity pool, a bank holding financial in nature, as defined in section 4(k) of the 24 See 7 U.S.C. 2(h)(7)(D); 15 U.S.C. 78c–3(g)(4). company, a private fund (as defined in section Bank Holding Company Act of 1956. See 7 U.S.C. This exception does not apply to a person that is 202(a) of the Investment Advisers Act of 1940), an 2(h)(7)(C)(i); 15 U.S.C. 78c–3(g)(3). a swap dealer, security-based swap dealer, major employee benefit plan or government plan (as 20 See 7 U.S.C. 2(h)(7)(C)(ii); 17 CFR 50.50; 77 FR swap participant, major security-based swap defined in paragraphs (3) and (32) of section 3 of 42560 (July 19, 2012); as recodified by 77 FR 74284 participant, an issuer that would be an investment the Employee Retirement Income Security Act of (December 13, 2012). company as defined in section 3 of the Investment 1974), an insured depository institution, a Farm 21 See 15 U.S.C. 78c–3(g)(3)(B). Company Act of 1940 (15 U.S.C. 80a-3) but for Credit System institution, a credit union, a nonbank

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Since the exemption in § __.1(d) of the counterparties that are excluded from believe that whenever a covered swap final rule incorporates the treasury the margin requirements of the joint entity transacts in a swap with an affiliate exception by reference to final rule by referring to specific eligible entity that uses the clearing section 2(h)(7)(D) of the Commodity sections of the Commodity Exchange exemption for that swap in compliance Exchange Act and section 3C(g)(4) of the Act and the Securities Exchange Act. with these CFTC requirements, the Securities Exchange Act, the exemption These provisions, in turn, set forth covered swap entity needs no additional will by operation of law apply to clearing exceptions and exemptions for information from the eligible entity to qualifying non-cleared swaps and non- these counterparties. To qualify for such proceed with that swap pursuant to the cleared security-based swaps of treasury exceptions and exemptions, the final rule’s exemption from the margin affiliates, acting as either principal or counterparty must, in addition to falling requirements of the joint final rule. agent. For this reason, no changes to the within the class or type of entity With respect to security-based swaps, regulatory text were necessary to reflect exempted or excepted by the respective the SEC has not yet made these changes to the underlying statutory provisions, also be entering statutes.28 into the swap or security-based swap to determinations requiring any security- hedge or mitigate commercial risk, and based swap to be cleared, and has not C. Certain Cooperative Entities must report to the applicable yet adopted final rules related to how Section 302 of TRIPRA provides that Commission (in a manner set forth by eligibility and compliance with the the initial and variation margin the applicable Commission) how it associated substantive requirements can 34 requirements shall not apply to a non- generally meets its financial obligations be documented. For a security-based cleared swap in which a counterparty associated with entering into non- swap subject to clearing, compliance qualifies for an exemption issued under cleared swaps or non-cleared security- with the SEC regulatory requirements, section 4(c)(1) of the Commodity based swaps.31 once finalized, will provide the covered Exchange Act from the clearing swap entity with sufficient information requirements of section 2(h)(1)(A) of the Swaps and Security-Based Swaps about the eligible entity and the Commodity Exchange Act for Required to be Cleared security-based swap to establish that the cooperative entities as defined in such For swaps that the CFTC has security-based swap is also exempt from exemption.29 The CFTC, pursuant to its determined are required to be cleared, the margin requirements of the joint authority under section 4(c)(1) of the the CFTC has adopted regulations that final rule. Until such time as Commodity Exchange Act, adopted a establish requirements by which an determinations are finalized by the SEC, regulation that allows cooperatives that eligible entity may elect its option not the Agencies expect that covered swap are financial entities to elect an to clear that type of swap and comply entities will take appropriate steps to exemption from mandatory clearing of with the related substantive hedging establish a reasonable belief that the swaps that: (1) They enter into in and reporting requirements.32 For such entity is of a type eligible for the connection with originating loans for a swap, compliance with the CFTC exemption and is using the security- their members; or (2) hedge or mitigate regulatory requirements for a swap based swap to hedge or mitigate commercial risk related to loans or subject to clearing will provide the commercial risk, as described below for swaps with their members, or arising covered swap entity with sufficient other non-cleared swaps and non- from certain swaps with members.30 information about the eligible entity and cleared security-based swaps. The swaps of these cooperatives that the swap to establish the swap is also would qualify for an exemption from exempt from the margin requirements of Swaps and Security-Based Swaps Not clearing also would qualify pursuant to the joint final rule.33 The Agencies Required To Be Cleared § __.1(d) for an exemption from the There are also cases where a covered margin requirements of the joint final 31 7 U.S.C. 2(h)(7)(A); 17 CFR 50.50(b); 15 U.S.C. rule. 3C(g)(4). Other provisions of the Commodity swap entity may enter into a non- Exchange Act and the Securities Exchange Act cleared swap or non-cleared security- D. Compliance With Eligibility separately impose additional governance based swap with an eligible entity that Requirements requirements on an entity that elects a clearing exemption and that is an issuer of securities the CFTC or SEC, respectively, does not Section 302 of TRIPRA identifies the registered under section 12 of, or that is required require to be cleared. For swaps that are types of non-cleared swaps or non- to file reports under section 15(d) of, the Securities not subject to a CFTC or SEC clearing cleared security-based swaps with Exchange Act of 1934. 7 U.S.C. 2(j); 15 U.S.C. 3C(i). requirement, the Agencies expect that 32 17 CFR 50.50(b), 50.51(c), 50.51. In addition to covered swap entities will take providing reporting requirements, these CFTC rules financial company supervised by the Board, or an further define the entities that are eligible for appropriate steps to establish a entity engaged in the insurance business and exceptions and exemptions from the clearing reasonable belief that the counterparty subject to capital regulation by an insurance requirements and define when a swap is used to is an entity eligible for the exemption regulator. The Appropriations Act of 2016 further hedge or mitigate commercial risk. and is using the swap to hedge or prohibited the treasury affiliate exception from 33 Whenever a qualifying non-clearing entity has applying to affiliates which are themselves elected its option to not clear a swap that the CFTC affiliated with swap entities unless the CFTC or the has determined should be cleared, the entity’s entity that meets the associated hedging and SEC, as applicable, determines that doing so is in eligibility as well as its compliance with the reporting requirements. See 17 CFR 50.50(b)(2)–(3) the public interest. See Pub. L. 114–113, 129 Stat. associated hedging and reporting requirements and 50.51(c). 2242 (2015). must be demonstrated either: (1) In an annual filing 34 In December 2010, the SEC proposed reporting 28 Accordingly, the Agencies find it unnecessary by the entity reporting to an appropriate Swap Data requirements for a counterparty exercising an to provide further notice or seek further public Repository (SDR) or, if no registered SDR is exception from clearing, which would require the comment regarding the effect of the Appropriations available to receive the information, to the CFTC, entity to report to a security-based SDR that it is an Act of 2016 on this final rule. which will be applicable to all such swaps entered eligible entity and: that the swap is being used to 29 See 7 U.S.C. 6(c)(1). The CFTC, pursuant to its into by the entity for 365 days following the date hedge or mitigate commercial risk; how it generally authority under section 4(c)(1) of the Commodity of such filing; or (2) on a swap-by-swap basis meets its financial obligations associated with Exchange Act, adopted 17 CFR 50.51, which allows through a report filed by the eligible entity or the entering into non-cleared security-based swaps, cooperative financial entities that meet certain covered swap entity with the applicable SDR or, if and, if a registered issuer of securities, whether a qualifications to elect not to clear certain swaps that no registered SDR is available to receive the committee of the board has reviewed and approved are otherwise required to be cleared pursuant to information, the CFTC. The rule requires that the the decision to enter into security-based swaps section 2(h)(1)(A) of the Commodity Exchange Act. reporting counterparty have a reasonable basis to subject to the clearing exception. 75 FR 79992 30 See 7 U.S.C. 6(c)(1); 17 CFR 50.51. believe that the electing counterparty is an eligible (December 21, 2010).

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mitigate commercial risk.35 The final institutions generally must take effect and Capital Requirements for Covered rule does not prescribe any specific on the first day of a calendar quarter Swap Entities. procedure or standard in this regard, that begins on or after the date on which Frequency of Response: Annual, and instead leaves covered swap entities the regulations are published in final daily, and event-generated. the flexibility to collect information form.38 Accordingly, this final rule, Affected Public: The affected public of specifically on these points, take which adopts the interim final rule the OCC, FDIC, and Board is assigned cognizance of information they already without change, will be effective on generally in accordance with the entities have about their counterparties and October 1, 2016 as required under the covered by the scope and authority their non-cleared swap and non-cleared RCDRIA. section of their respective final rule. security-based swap transactions, or a Businesses or other for-profit. V. Administrative Law Matters combination of both. The Agencies Respondents: believe it would be reasonable for a A. Solicitation of Comments on Use of OCC: Any national bank or a covered swap entity to rely in good faith Plain Language subsidiary thereof, Federal savings on reasonable representations of its association or a subsidiary thereof, or Section 722 of the Gramm-Leach- Federal branch or agency of a foreign counterparty in making these Bliley Act, Public Law 106–102, sec. 36 bank that is registered as a swap dealer, assessments. 722, 113 Stat. 1338, 1471 (Nov. 12, major swap participant, security-based In addition to the entity type 1999), requires the OCC, Board and swap dealer, or major security-based requirements and the hedging FDIC to use plain language in all swap participant. requirements specified in the statutory proposed and final rules published after clearing exceptions and exemptions FDIC: Any FDIC-insured state- January 1, 2000. The OCC, Board and chartered bank that is not a member of referenced under section 302 of FDIC sought to present the final rule in TRIPRA, there are requirements for the Federal Reserve System or FDIC- a simple and straightforward manner insured state-chartered savings reporting to the relevant Commission, in and did not receive any comments on association that is registered as a swap the manner set forth by the Commission, the use of plain language. when the clearing exceptions and dealer, major swap participant, security- exemptions are elected. The Agencies B. Paperwork Reduction Act Analysis based swap dealer, or major security- expect covered swap entities subject to Certain provisions of the final rule based swap participant. the joint final rule to comply with any contain ‘‘collection of information’’ Board: Any state member bank (as reporting requirements that the relevant requirements within the meaning of the defined in 12 CFR 208.2(g)), bank Commission may impose on covered Paperwork Reduction Act (‘‘PRA’’) of holding company (as defined in 12 swap entities in order to permit the use 1995 (44 U.S.C. 3501–3521). In U.S.C. 1841), savings and loan holding of the margin exemptions pursuant to accordance with the requirements of the company (as defined in 12 U.S.C. section 302 of TRIPRA. PRA, the Agencies may not conduct or 1467a), foreign banking organization (as defined in 12 CFR 211.21(o)), foreign IV. Effective Date sponsor, and the respondent is not required to respond to, an information bank that does not operate an insured The Riegle Community Development collection unless it displays a currently branch, state branch or state agency of and Regulatory Improvement Act of valid Office of Management and Budget a foreign bank (as defined in 12 U.S.C. 1994 (the ‘‘RCDRIA’’) requires that the (OMB) control number. The OMB 3101(b)(11) and (12)), or Edge or OCC, the Board, and the FDIC, in control number for the OCC is 1557– agreement corporation (as defined in 12 determining the effective date and 0335, the FDIC is 3064–0204, and the CFR 211.1(c)(2) and (3)) that is administrative compliance requirements Board is 7100–0364. The information registered as a swap dealer, major swap of new regulations that impose collection requirements contained in participant, security-based swap dealer, additional reporting, disclosure, or other this final rulemaking have been or major security-based swap requirements on insured depository submitted to OMB for review and participant. institutions, consider, consistent with approval by the OCC and FDIC under Abstract: This final rule implements principles of safety and soundness and section 3507(d) of the PRA and Title III of the Terrorism Risk Insurance the public interest, any administrative § 1320.11 of OMB’s implementing Program Reauthorization Act of 2015 burdens that such regulations would regulations (5 CFR part 1320). The (‘‘TRIPRA’’), which exempts from the place on depository institutions, Board reviewed the final rule under the Agencies’ swap margin rules non- including small depository institutions, authority delegated to the Board by cleared swaps and non-cleared security- and customers of depository OMB. The Agencies received no based swaps in which a counterparty institutions, as well as the benefits of comments on the PRA. qualifies for an exemption or exception such regulations.37 In addition, new The final rule contains requirements from clearing under the Dodd-Frank regulations by the OCC, the Board, or subject to the PRA. The reporting Act. This final rule is a companion rule the FDIC that impose additional requirements are found in § _.1(d). The to the joint final rule adopted by the reporting, disclosures, or other new final rule implements statutory language Agencies to implement section 731 and requirements on insured depository that requires certain swaps of certain 764 of the Dodd-Frank Act. counterparties to qualify for a statutory Reporting Requirements 35 As noted above, this category of non-cleared exemption or exception from clearing in swaps includes all non-cleared security-based order to not be subject to the initial and The final rule implements statutory swaps during the interim until the SEC adopts final language that requires certain swaps and regulations requiring clearing of security-based variation margin requirements of the swaps and associated exemptions from clearing. joint final rule. security-based swaps of certain 36 See the Agencies’ joint final rule at 80 FR counterparties to qualify for a statutory 74858 (November 30, 2015), discussing covered Proposed Information Collection exemption or exception from clearing in swap entities’ reliance in good faith on reasonable Title of Information Collection: order to not be subject to the initial and representations of a counterparty as to whether the Reporting and Recordkeeping variation margin requirements of the counterparty is a financial end user with a material swaps exposure; see also 17 CFR 50.50(b)(2)–(3) and Requirements Associated with Margin joint final rule. The reporting 50.51(c). requirements are found in § __.1(d) 37 12 U.S.C. 4802(a). 38 12 U.S.C. 4802(b). pursuant to cross-references to other

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statutory provisions that set forth the Proposed revisions only estimated Board’s initial analysis, the Board’s conditions for an exemption from annual burden: 50,000 hours. assessment of such issues, and a clearing. For example, TRIPRA provides Total estimated annual burden: statement of any changes made as a that the initial and variation margin 86,964 hours. result of such comments. The Board did requirements of the joint final rule shall FCA: The FCA has determined that not receive comments specifically on not apply to a non-cleared swap or non- the final rule does not involve a the initial regulatory flexibility analysis cleared security-based swap in which a collection of information pursuant to contained in the interim final rule, but counterparty qualifies for an exception the Paperwork Reduction Act for Farm the Agencies did receive comments on under section 2(h)(7)(A) of the Credit System institutions because Farm other aspects of the rule. A full Commodity Exchange Act or section Credit System institutions are Federally discussion of all comments received by 3C(g)(1) of the Securities Exchange Act, chartered instrumentalities of the the Agencies with respect to this rule is which includes certain reporting United States and instrumentalities of contained in the SUPPLEMENTARY requirements established by the CFTC the United States are specifically INFORMATION, above. or the SEC.39 Certain other excepted from the definition of 3. Small entities affected by the final counterparties that are exempt from ‘‘collection of information’’ contained in rule. This final rule may have an effect clearing pursuant to other provisions are 44 U.S.C. 3502(3). on the following types of small entities: FHFA: With respect to any regulated also required to meet these reporting (i) Covered swap entities that are subject entity as defined in section 1303(20) of requirements to notify the CFTC or the to the joint final rule’s capital and 40 the Federal Housing Enterprises SEC. Thus, in certain cases, the margin requirements; and (ii) certain Financial Safety and Soundness Act of statutory exemption from clearing counterparties (e.g., non-financial end 1992, as amended (12 U.S.C. 4502(20)), requires a notification to the CFTC or users and certain other small financial the final rule does not contain any SEC. These counterparties may be counterparties) that engage in swaps or collection of information that requires required to meet the same notification security-based swaps with covered swap the approval of the OMB under the PRA. requirements that are required for an entities.43 exception or exemption from clearing in C. Regulatory Flexibility Act Analysis order to qualify for an exception or Under Small Business Administration exemption pursuant to § __.1(d) from Board: An initial regulatory flexibility (the ‘‘SBA’’) regulations, the finance and the initial and variation margin analysis, in accordance with the insurance sector includes commercial requirements established by the Regulatory Flexibility Act (5 U.S.C. 601 banking, savings institutions, credit 42 Agencies under sections 731 and 764 of et seq.) (‘‘RFA’’), was included in the unions, other depository credit the Dodd-Frank Act. Since this final interim final rule. In the initial intermediation and credit card issuing rule serves to implement exemptions regulatory flexibility analysis, the Board entities (‘‘financial institutions’’), which and exceptions by reference to existing requested comments on all aspects of generally are considered ‘‘small’’ if they 44 statutory provisions, § __.1(d) imposes the initial regulatory flexibility analysis, have assets of $550 million or less. new reporting requirements that are and, in particular, comments on its Covered swap entities would be required under the relevant statutory conclusion that the interim final rule considered financial institutions for provisions. would not have a significant economic purposes of the RFA in accordance with Estimated Burden per Response: impact on a substantial number of small SBA regulations. The Board does not § _.1(d)—1 hour. entities. The Board also requested expect that any covered swap entity is Annual Frequency: 1,000. comments on any significant likely to be a small financial institution, alternatives to the interim final rule that because a small financial institution is OCC would minimize the impact of the rule unlikely to engage in the level of swap Number of respondents: 20. on small entities. The Board has since activity that would require it to register Total estimated annual burden: considered the potential impact of this as a swap dealer or major swap 20,000 hours. final rule on small entities in participant.45 None of the currently FDIC 41 accordance with section 604 of the RFA and has prepared the following final 43 The Board notes that the RFA does not require Number of respondents: 1. regulatory flexibility analysis. Based on the Board to consider the impact of the final rule, Total estimated annual burden: 1,000 the Board’s analysis, and for the reasons including its indirect economic effects, on small hours. entities that are not subject to the requirements of stated below, the Board believes that the the final rule. See e.g., In Mid-Tex Electric Board final rule will not have a significant Cooperative v. FERC, 773 F.2d 327 (D.C. Cir. 1985); economic impact on a substantial United Distribution Cos. v. FERC, 88 F.3d 1105, Number of respondents: 50. 1170 (D.C. Cir. 1996); Cement Kiln Recycling number of small entities. Coalition v. EPA, 255 F.3d 855 (D.C. Cir. 2001). 39 See, e.g., 17 CFR 50.50(b). 1. Statement of the need for, and 44 See 13 CFR 121.201 (effective December 2, 40 For example, certain exempt cooperatives must objectives of, the final rule. As 2014); see also 13 CFR 121.103(a)(6) (noting factors meet these reporting requirements to qualify for an explained in detail above, this final rule that the SBA considers in determining whether an exemption from clearing. See 17 CFR 50.51(c). implements section 302 of TRIPRA, entity qualifies as a small business, including Similarly, exempt treasury affiliates also must be an receipts, employees, and other measures of its affiliate of a person that qualifies for an exception which provides that initial and variation domestic and foreign affiliates). from clearing that notifies the CFTC or SEC how it margin requirements will not apply to 45 The CFTC has published a list of provisionally generally meets its financial obligations associated specified non-cleared swaps or non- registered swap dealers (as of February 9, 2016) and with entering into non-cleared swaps or non- cleared security-based swaps of certain provisionally registered major swap participants (as cleared security-based swaps. See 7 U.S.C. counterparties (to a covered swap of March 1, 2013) that does not include any small 2(h)(7)(D); 15 U.S.C. 78c–3(g)(4). financial institutions. See http://www.cftc.gov/ 41 The FDIC had initially estimated that three of entity). The reasons and justification for LawRegulation/DoddFrankAct/registerswapdealer its institutions might register as a swap dealer, the final rule are described above in the and http://www.cftc.gov/LawRegulation/ major swap participant, security-based swap dealer SUPPLEMENTARY INFORMATION. DoddFrankAct/registermajorswappart. The SEC has or major security-based swap participant but no 2. Summary of the significant issues not provided a similar list since it only recently state non-member bank nor any state savings adopted rules to provide for the registration of association has so registered, so FDIC is reducing raised by public comment on the security-based swap dealers and major security- its estimate to one as a placeholder for its based swap participants. See 80 FR 48963 (August information collection. 42 See 5 U.S.C. 601 et seq. 14, 2015); 17 CFR parts 240 and 249.

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registered covered swap entities are In light of the foregoing, the Board relating to an initial and final regulatory small entities. The final rule would have does not believe that this final rule flexibility analysis do not apply. an indirect effect on certain would have a significant economic FCA: Pursuant to section 605(b) of the counterparties to non-cleared swaps and impact on a substantial number of small Regulatory Flexibility Act, the FCA non-cleared security-based swaps. Many entities. hereby certifies that the final rule will of these counterparties would be FDIC: The RFA requires an agency, in not have a significant economic impact considered ‘‘small’’ under the SBA’s connection with a notice of final regulations.46 However, the effect of rulemaking, to prepare a Final on a substantial number of small TRIPRA and the final rule will be to Regulatory Flexibility Act analysis entities. Each of the banks in the Farm exempt many of the non-cleared swaps describing the impact of the rule on Credit System, considered together with and non-cleared security-based swaps of small entities (defined by the SBA for its affiliated associations, has assets and these counterparties from the margin purposes of the RFA to include banking annual income in excess of the amounts requirements of the Agencies’ joint final entities with total assets of $550 million that would qualify them as small rule. or less) or to certify that the final rule entities. Nor does the Federal 4. Projected reporting, recordkeeping will not have a significant economic Agricultural Mortgage Corporation meet and other compliance requirements of impact on a substantial number of small the definition of a ‘‘small entity.’’ the final rule. As described above, this entities. Therefore, Farm Credit System final rule implements statutory language Using SBA’s size standards, as of June institutions are not ‘‘small entities’’ as that requires certain swaps of certain 30, 2015, the FDIC supervised 3,357 defined in the Regulatory Flexibility counterparties to qualify for a statutory small entities. The FDIC does not expect Act. exemption or exception from the any small entity that it supervises is applicable clearing requirements in likely to be a covered swap entity FHFA: FHFA certifies that the final order to not be subject to the initial and because such entities are unlikely to rule will not have a significant variation margin requirements of the engage in the level of swap activity that economic impact on a substantial joint final rule. The reporting would require them to register as a swap number of small entities, since none of requirements are found in § _.1(d) of entity. Because TRIPRA excludes non- FHFA’s regulated entities comes within this final rule pursuant to cross- cleared swaps entered into for hedging the meaning of a ‘‘small entity’’ as references to other statutory provisions purposes by a financial institution with defined in the Regulatory Flexibility Act that set forth the conditions for an total assets of $10 billion or less from (see 5 U.S.C. 601(6)), and the final rule exemption or exception from clearing. the requirement of the final rule, the will not substantially affect any In certain cases, the statutory exemption FDIC expects that when a covered swap business that its regulated entities might from clearing and related regulations entity transactions non-cleared swaps conduct with any such small entity. may require a counterparty to report with a small entity supervised by the information, such as how it meets its FDIC, and such swaps are used to hedge List of Subjects swaps obligations, to the CFTC or SEC. the small entity’s commercial risk, those 12 CFR Part 45 These counterparties may be required to swaps will not be subject to the final meet the same notification requirements rule. The FDIC does not expect any Administrative practice and that are required for an exception or small entity that it supervises will procedure, Capital, Margin exemption from the relevant CFTC and engage in non-cleared swaps for requirements, National Banks, Federal SEC regulations. Other than this purposes other than hedging. Therefore, Savings Associations, Reporting and potential overlap of reporting the FDIC does not believe that the recordkeeping requirements, Risk. obligations of this final rule and the interim final rule results in a significant relevant CFTC and SEC regulations, the economic impact on a substantial 12 CFR Part 237 Board is not aware of any other Federal number of small entities under its rules that duplicate, overlap, or conflict supervisory jurisdiction. Administrative practice and with this final rule. In light of the The FDIC certifies that the interim procedure, Banks and banking, Capital, exemptions provided for the non- final rule does not have a significant Foreign banking, Holding companies, cleared swaps and non-cleared security- economic impact on a substantial Margin requirements, Reporting and based swaps of many small entities, the number of small FDIC-supervised recordkeeping requirements, Risk. Board does not believe that the final institutions. 12 CFR Part 349 rule would have a significant economic OCC: The Regulatory Flexibility Act impact on a substantial number of small (RFA) 47 generally requires an agency Administrative practice and entity counterparties. that is issuing a proposed rule to procedure, Banks, Holding companies, 5. Significant alternatives to the final prepare and make available for public Capital, Margin requirements, Reporting rule. Since the final rule was required comment an initial regulatory flexibility and recordkeeping requirements, by TRIPRA, the Board does not believe analysis that describes the impact of the Savings associations Risk. that there are any significant proposed rule on small entities. The alternatives to the rule which would RFA does not apply to a rulemaking 12 CFR Part 624 accomplish the stated objectives of the where a general notice of proposed applicable statute. rulemaking is not required.48 For the Accounting, Agriculture, Banks, reasons described above in the Banking, Capital, Cooperatives, Credit, 46 See 13 CFR 121.201. In addition to small Supplementary Information, the OCC Margin requirements, Reporting and financial institutions with assets of $550 million or recordkeeping requirements, Risk, Rural less, swap counterparties could also include other has previously determined that it was small entities defined in regulations issued by the unnecessary to publish a notice of areas, Swaps. SBA, including firms within the ‘‘Securities, proposed rulemaking for this final rule. 12 CFR Part 1221 Commodity Contracts, and Other Financial Accordingly, the RFA’s requirements Investments and Related Activities’’ sector with assets of $38.5 million or less and ‘‘Funds, Trusts Government-sponsored enterprises, and Other Financial Vehicles’’ with assets of $32.5 47 See 5 U.S.C. 601 et seq. Mortgages, Securities. million or less. 48 See 5 U.S.C. 603 and 604.

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Department of the Treasury Dated: June 21, 2016. FAA’s aeronautical database. O’Neal Thomas J. Curry, Airport, Vincennes, IN, is removed from Office of the Comptroller of the this rule as the Class E airspace area was Currency Comptroller of the Currency. removed in a rule published in the By order of the Board of Governors of the 12 CFR Chapter I Federal Reserve System, July 26, 2016. Federal Register of October 23, 2015. DATES: Effective 0901 UTC, November PART 45—MARGIN AND CAPITAL Robert deV. Frierson, 10, 2016. The Director of the Federal REQUIREMENTS FOR COVERED Secretary of the Board. Register approves this incorporation by SWAP ENTITIES Dated at Washington, DC, this 21 of June reference action under Title 1, Code of 2016. Federal Regulations, part 51, subject to ■ Accordingly, the interim final rule By order of the Board of Directors. the annual revision of FAA Order amending 12 CFR part 45, which was Federal Deposit Insurance Corporation. 7400.9 and publication of conforming published at 80 FR 74916 on November Robert E. Feldman, amendments. 30, 2015, is adopted as a final rule Executive Secretary. ADDRESSES: FAA Order 7400.9Z, without change. Dated: June 22, 2016. Airspace Designations and Reporting Board of Governors of the Federal Dale L. Aultman, Points, and subsequent amendments can be viewed online at http://www.faa.gov/ Reserve System Secretary, Farm Credit Administration Board. _ Dated: June 27, 2016. air traffic/publications/. For further 12 CFR Chapter II information, you can contact the Melvin L. Watt, Airspace Policy Group, Federal Aviation PART 237—SWAPS MARGIN AND Director, Federal Housing Finance Agency. Administration, 800 Independence SWAPS PUSH-OUT [FR Doc. 2016–18193 Filed 8–1–16; 8:45 am] Avenue SW., Washington, DC 20591; BILLING CODE 4810–33–P; 8070–01–P; 6705–01–P; telephone: 202–267–8783. The Order is Subpart A—Margin and Capital 6714–01–P; 6210–01–P; 4810–33–P also available for inspection at the Requirements for Covered Swap National Archives and Records Entities DEPARTMENT OF TRANSPORTATION Administration (NARA). For information on the availability of FAA ■ Accordingly, the interim final rule Federal Aviation Administration Order 7400.9Z at NARA, call 202–741– amending 12 CFR part 237, subpart A 6030, or go to http://www.archives.gov/ which was published at 80 FR 74916 on 14 CFR Part 71 federal_register/code_of_federal- November 30, 2015, is adopted as a final regulations/ibr_locations.html. rule without change. [Docket No. FAA–2016–4291; Airspace FAA Order 7400.9, Airspace Docket No. 16–AGL–7] Designations and Reporting Points, is Federal Deposit Insurance Corporation published yearly and effective on Amendment of Class E Airspace for 12 CFR Chapter III September 15. the following Indiana Towns; Goshen, FOR FURTHER INFORMATION CONTACT: PART 349—DERIVATIVES IN; Greencastle, IN; Huntingburg, IN; North Vernon, IN; Rensselaer, IN; Tell Jeffrey Claypool, Federal Aviation City, IN; and Washington, IN Administration, Operations Support ■ Accordingly, the interim final rule Group, Central Service Center, 10101 amending 12 CFR part 349 which was AGENCY: Federal Aviation Hillwood Parkway, Fort Worth, TX published at 80 FR 74916 on November Administration (FAA), DOT. 76177; telephone (817) 222–5711. 30, 2015, is adopted as a final rule ACTION: Final rule. SUPPLEMENTARY INFORMATION: without change. SUMMARY: This action modifies Class E Authority for This Rulemaking Farm Credit Administration airspace extending upward from 700 The FAA’s authority to issue rules 12 CFR Chapter VI feet above the surface at Virgil I. regarding aviation safety is found in Grissom Municipal Airport, Bedford, IN; Title 49 of the United States Code. ■ Accordingly, the interim final rule Goshen Municipal Airport, Goshen, IN; Subtitle I, Section 106 describes the amending 12 CFR part 624 which was Putnam County Airport, Greencastle, IN; authority of the FAA Administrator. published at 80 FR 74916 on November Huntingburg Airport, Huntingburg, IN; Subtitle VII, Aviation Programs, 30, 2015, is adopted as a final rule North Vernon Airport, North Vernon, describes in more detail the scope of the without change. IN; Jasper County Airport, Rensselaer, agency’s authority. This rulemaking is IN; Perry County Municipal Airport, promulgated under the authority Federal Housing Finance Agency Tell City, IN; and Daviess County described in Subtitle VII, Part A, Chapter XII—Federal Housing Finance Airport, Washington, IN. Subpart I, Section 40103. Under that Agency Decommissioning of non-directional section, the FAA is charged with radio beacons (NDBs), cancellation of prescribing regulations to assign the use Subchapter B—Entity Regulations NDB approaches, and implementation of airspace necessary to ensure the of area navigation (RNAV) procedures safety of aircraft and the efficient use of PART 1221—MARGIN AND CAPITAL have made this action necessary for the airspace. This regulation is within the REQUIREMENTS FOR COVERED safety and management of Instrument scope of that authority as it amends SWAP ENTITIES Flight Rules (IFR) operations at these Class E airspace at Virgil I. Grissom airports. This action also updates the Municipal Airport, Bedford, IN; Goshen ■ Accordingly, the interim final rule geographic coordinates of Goshen Municipal Airport, Goshen, IN; Putnam amending 12 CFR part 1221 which was Municipal Airport, Putnam County County Airport, Greencastle, IN; published at 80 FR 74916 on November Airport, North Vernon Airport, Jasper Huntingburg Airport, Huntingburg, IN; 30, 2015, is adopted as a final rule County Airport, and Perry County North Vernon Airport, North Vernon, without change. Municipal Airport to coincide with the IN; Jasper County Airport, Rensselaer,

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