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JPMorgan, BofA get delay on rule isolating derivatives

By Silla Brush, Bloomberg

January 4, 2013 • Reprints

JPMorgan Chase & Co., Goldman Sachs Group Inc. 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.

Commercial banks including the Wall Street firms may get as long as an additional two years -- until July 2015 -- to comply with the rules, the Office of the Comptroller of the Currency said in a notice yesterday. The so-called pushout provision was included in the 2010 financial-regulation law as a way to limit taxpayer support for risky derivatives trades.

The Commodity Futures Trading Commission and other regulators need to complete 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.

Regulators including Federal Reserve Chairman Ben S. Bernanke had opposed the provision, saying it would drive derivatives to less-regulated entities. In February, the House Financial Services Committee approved with bipartisan support legislation that would let banks keep commodity and equity derivatives in insured units by removing part of the rule.

The OCC is prepared to “consider favorably” requests for transition, the regulator said in the six-page notice. The agency said delays could be extended for a third year based on consultations with other regulators.

OCC Report

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.

Banks including Citigroup Inc. will be given as long as two years beyond the July 16 deadline to move their swaps businesses, the OCC said. They must submit written requests describing how a 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 weigh how the transition period would affect insured depositors.

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Related Terms
US Federal Reserve 8527bank 6455Congress 1894Commodity Futures Trading Commission 1289cftc 937Goldman Sachs Group Inc. 864JPMorgan Chase & Co. 818Ben S. Bernanke 751Ben S 613Citigroup Inc. 603Bank of America Corp. 596Massachusetts 585Deutsche Bank AG 426Regulation 344banks 275Dodd-Frank 182Arkansas 113Comptroller of the Currency 105House Financial Services Committee 90Securities Industry and Financial Markets Association 76Federal Deposit Insurance Corp. 74Federal Deposit Insurance Corp 67Barney Frank 47Bank of New York Mellon Corp. 39Senate Agriculture Committee 33deposit insurance 28Volcker Rule 27Credit Suisse AG 23American Federation of Labor - Congress of Industrial Organizations 16Blanche Lincoln 16Sheila Bair 16Institute of International Bankers 7Marcus Stanley 7Ken Bentsen 5financial-regulation law 4Sally Miller 2Eric Kollig 2Goldman Sachs Bank USA 1Andrew Gray 1

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