Statement of Chairman Heath P. Tarbert in Support of Proposed Amendments to the Part 50 Clearing Requirement
April 14, 2020
I am pleased to support today’s proposal to amend the CFTC’s Part 50 rules, which implement the swap clearing requirement of section 2(h)(1) of the Commodity Exchange Act (the “Clearing Requirement”). The proposed Part 50 amendments would create new regulations 50.75 and 50.76, which would codify existing exemptions from the Clearing Requirement for swaps entered into with certain central banks, sovereign entities, and international financial institutions.[1]
Separately, today’s proposal would create new regulations 50.77, 50.78, and 50.79, which would exempt from the Clearing Requirement certain swaps entered into by small bank holding companies, savings and loan holding companies, and community development financial institutions.[2] The proposal also provides a compliance schedule setting forth all the past compliance dates for the 2012 and 2016 swap clearing requirement rules and contemplates certain technical amendments to various other provisions within Part 50.
Together, these amendments to the Clearing Requirement would clarify existing exemptions for banks, savings associations, farm credit systems, and credit units with total assets under $10 billion.[3] While these entities are small, they play outsized roles in supporting the U.S. economy. These are not Wall Street banks, but primarily local institutions that support American communities, businesses, and families. Clarifying their relief from the Clearing Requirement advances the CFTC’s strategic goal of regulating the derivatives markets to promote the interests of all Americans.[4]
In addition, today’s proposed amendments to the Clearing Requirement will significantly reduce costs and regulatory burdens for entities that pose little or no systemic risk to the United States—i.e., foreign governmental institutions on the one hand, and small domestic lenders on the other. By codifying existing exemptions, the Commission will give certainty to market participants by etching their clearing exemptions—now fragmented among various no-action letters—into the text of our Part 50 rules. Doing so is especially important in these challenging times: more than ever, certainty will help our market participants continue to perform their important functions. Today’s proposed amendments to the Clearing Requirement take an important step in that direction.
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[1] The majority of the entities covered by the proposed rule were previously identified in the preamble to the 2012 End-User Exception final rule as entities that should not be subject to the Clearing Requirement. See End-User Exception to the Clearing Requirement for Swaps, 77 FR 42560 (Jul. 19, 2012). Four international financial institutions covered by the proposed amendment separately obtained staff no-action letters concerning the clearing requirement. See CFTC Letter No. 13-25 (June 10, 2013) (providing no-action relief to the Corporación Andina de Fomento); CFTC Letter No. 17-57 (Nov. 7, 2017) (providing no-action relief to Banco Centroamericano de Integración Económica); CFTC Letter No. 17-59 (Nov. 7, 2017) (providing no-action relief to the North American Development Bank); and CFTC Letter No. 17-58 (Nov. 7, 2017) and CFTC Letter No. 19-23 (Oct. 16, 2019) (providing no-action relief to the European Stability Mechanism).
[2] In 2018, the Commission proposed to exempt these entities from the Clearing Requirement, but today we are supplementing that earlier proposal with technical amendments to the rule text, and we are soliciting additional public comment. See Amendments to Clearing Exemption for Swaps Entered Into by Certain Bank Holding Companies, Savings and Loan Holding Companies, and Community Development Financial Institutions, 83 FR 44001 (Aug. 29, 2018).
[3] See proposed new regulations 50.77, 50.78, and 50.79.
[4] See Remarks of CFTC Chairman Heath P. Tarbert to the 35th Annual FIA Expo 2019 (Oct. 30, 2019), available at https://www.cftc.gov/PressRoom/SpeechesTestimony/opatarbert2 (outlining the CFTC’s strategic goals).