The OCC has issued guidance (the “Guidance”) relating to the transition period for compliance with Section 716 of the Dodd-Frank Act, known as the “Swaps Push-Out Rule.” The OCC stated in the Guidance that it would consider favorably requests for a transition period from insured depository institutions that are, or may become, subject to the Swaps Push-Out Rule. The Swaps Push-Out Rule prohibits providing federal assistance, such as federal deposit insurance or access to the discount window, to swaps entities, including federal depository institutions that are swap dealers. Further, the Swaps Push-Out Rule provides for an appropriate transition period for insured depository institution swap entities to divest or cease nonconforming swap activities. The effective date for the Swaps Push-Out Rule is July 16, 2013.
The Guidance states that the prohibition on federal assistance does not apply during the transition period. Further, the Guidance provides that the transition period, which begins on the effective date, initially may be up to 24 months, as determined by the insured depository institution’s appropriate federal banking agency in consultation with the CFTC and the SEC. The appropriate federal banking agency, after consulting with the CFTC and SEC, may extend the transition period for up to one additional year.
Written requests for transition periods must be submitted by January 31, 2013. The Guidance requires each request to be written and specify the transition period appropriate to the institution, up to a two-year transition period commencing from July 16, 2013. The request must also outline how the institution plans to comply with the Swaps Push-Out Rule and how the transition period would mitigate adverse effects on the institution.