Transition Period under Section 716 of the Dodd-Frank Act

The Office of the Comptroller of the Currency (“OCC“) is notifying insured Federal depository institutions that are or may become swap dealers that the OCC is prepared to favorably consider requests for a transition period pursuant to Section 716(f) of the Dodd–Frank Act, provided that such requests conform to the procedures and conditions established in the OCC’s notice.

The OCC’s Guidance is effective immediately. Written requests for transition periods should be submitted to the OCC by January 31, 2013.

The Guidance cites a number of policy reasons why transition periods are warranted (e.g., “section 716 assumes a regulatory framework that is not yet complete. Further development of the Title VII regulatory framework is necessary for insured Federal depository institutions to make well-informed determinations concerning business restructurings that may be necessary for section 716 conformance”).  The Guidance makes it clear that a national bank or federal thrift that is or may become a registered swap dealer or securities-based swap dealer “should” apply for a transition period, and that such applications will be considered “favorably.”  Thus, although the deadline for submitting transition period requests is rather short (i.e., by January 31, 2013), a national bank or federal thrift that is uncertain whether registration will be required would be well-advised to submit an application nonetheless.  Notably, the Guidance does not apply to OCC-regulated uninsured “Federal branches” of foreign banks.  This suggests that the OCC is reading Section 716 as conferring a transition period only on FDIC-insured depository institutions and not on uninsured U.S. branches of foreign banks – notwithstanding admissions by members of Congress in July 2010 that this inconsistency in Section 716 was a drafting error.

View Notice in full here (links externally to OCC website).

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