JPMorgan and BofA Get Two-Year Delay in Dodd-Frank Swaps Pushout
By Silla Brush - Jan 3, 2013 3:00 PM ET
JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. (GS) and Bank of America Corp. won a delay of Dodd-Frank Act requirements that they wall off some derivatives trades from bank units backed by federal deposit insurance.
The banks will get an additional two years -- until July 2015 -- to comply with the rules, the Office of the Comptroller of the Currency said in a notice released today. The push-out provision was included in the 2010 financial-regulation law as a way to limit taxpayer support for risky derivatives trades.
Regulators including the Commodity Futures Trading Commission need to further develop swap rules to allow “federal depository institutions to make well-informed determinations concerning business restructurings that may be necessary,” the OCC said in the notice. Dodd-Frank requires that equity, some commodity and non-cleared credit derivatives be moved into separate affiliates without federal assistance.
In February, the U.S. House Financial Services Committee approved with bipartisan support legislation that would let banks keep commodity and equity derivatives in federally insured units by removing part of the push-out rule. Regulators including Federal Reserve Chairman Ben S. Bernanke had opposed the provision when it was included in Dodd-Frank, saying it would drive derivatives to less-regulated entities.
JPMorgan had 99 percent of its $72 trillion in notional swaps trades in its commercial bank in the third quarter of 2012, according to the OCC’s quarterly derivatives report. Bank of America had 68 percent of its $64 trillion in its commercial bank, according to the report.
The big banks also including Citigroup Inc. (C) will be given as long as two years beyond this year’s July 16 deadline to move their swaps businesses, the OCC said. Banks must submit written requests describing how the transition period would reduce harmful effects on mortgage lending, job creation and capital formation. The requests, which must be submitted by Jan. 31, also must consider how the transition period would impact on insured depositors.
To contact the reporter on this story: Silla Brush in Washington at sbrush@bloomberg.net
To contact the editor responsible for this story: Maura Reynolds at mreynolds34@bloomberg.net
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