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Application of Dodd-Frank Swaps Regulations to Foreign Banks

AIBA Quarterly Meeting September 20, 2012

David F. Freeman, Jr.Arnold & Porter LLPWashington, D.C.202-942-5745david.freeman@aporter.com

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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

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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

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Major Swap Participants Regulatory Requirements

Registration Reporting Compliance Program/Internal Controls Anti-fraud/Anti-manipulation

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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)

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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

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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

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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

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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