The CFTC’s Division of Swap Dealer and Intermediary Oversight (the “Division”) has issued no-action relief to permit foreign-owned U.S. banks to exclude the swap activity of their foreign affiliates from the calculations of swap activity for purposes of the de minimis exception included in the definition of “swap dealer.”
The letter provides that the Division will not recommend that the CFTC take enforcement action against any U.S. bank that is wholly owned by a foreign entity for failure to include the swap dealing activities of its foreign affiliates, or the U.S. branches of such affiliates, with respect to swap positions executed from and after October 12, 2012, for purposes of the de minimis exception. The relief is conditioned on a number of requirements. Among other requirements, the bank must be indirectly wholly-owned by a foreign entity; the bank must be a nationally chartered bank regulated by a U.S. prudential regulator; its ultimate foreign owner must be registered with the CFTC as a swap dealer; the U.S. bank’s direct parent must be registered with and subject to oversight by the FRB as a financial holding company and must file its financial statements with the SEC; no swap obligations of the foreign-owned U.S. bank may be guaranteed or otherwise supported by its foreign affiliates; and the foreign-owned U.S. bank must not rely on its foreign affiliates for operational servicing of its swaps business and must make its own credit determinations with respect to its swaps activities. Banks wishing to avail themselves of the relief must e-mail certain information to the CFTC.