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Banker Resource Center

Derivatives

Derivatives contracts generally represent agreements between parties either to make or receive payments or to buy or sell an underlying asset on a certain date (or dates) in the future. Parties generally use derivative contracts to mitigate risk, although such transactions may serve other purposes.

Laws and Regulations

Key laws and regulations that pertain to FDIC-supervised institutions; note that other laws and regulations also may apply.

  • Part 349 Derivatives — Appendix A Margin and Capital Requirements for Covered Swap Entities (also known as the Swap Margin Rule) establishes initial and variation margin requirements for covered swap entities
  • Part 324 — Capital Adequacy of FDIC-Supervised Institutions includes provisions regarding the capital treatment of derivatives exposures for the purpose of risk-based capital requirements and the supplementary leverage ratio
  • Part 327 Subpart A — Appendix A — Description of Scorecard Measures — Assessments includes provisions regarding the treatment of derivatives in deposit insurance assessments
  • Relevant Federal Register Notices incorporated into Parts 349, 324, and 327 that describe the basis and purpose of the rules and their revisions
    • Margin and Capital Requirements for Covered Swap Entities – TRIPRA Amendment; Final Rule: This final rule implements sections 731 and 764 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended by the Terrorism Risk Insurance Program Reauthorization Act of 2015 (“TRIPRA”). Sections 731 and 764 require the Agencies to adopt rules jointly to establish capital requirements and initial and variation margin requirements for such entities on all non-cleared swaps and non-cleared security-based swaps in order to offset the greater risk to such entities and the financial system arising from the use of swaps and security-based swaps that are not cleared.
    • Margin and Capital Requirements for Covered Swap Entities – EMNA Amendment; Final Rule: The final amendments to the Swap Margin Rule conform the definition of “Eligible Master Netting Agreement” to the definition of “Qualifying Master Netting Agreement” in the QFC Rules. The amendment to the Swap Margin Rule ensures that netting agreements of firms subject to the Swap Margin Rule are not excluded from the definition of “Eligible Master Netting Agreement” based solely on their compliance with the QFC Rules. The amendment also ensures that margin amounts required for non-cleared swaps covered by agreements that otherwise constitute Eligible Master Netting Agreements can continue to be calculated on a net portfolio basis, notwithstanding changes to those agreements that will be made in some instances by firms revising their netting agreements to achieve compliance with the QFC Rules. In addition, for any non-cleared swaps that were “entered into” before the compliance dates of the Swap Margin Rules—and which are accordingly grandfathered from application of the rule's margin requirements—the amendments state that any changes to netting agreements that are required to conform to the QFC Rules will not render grandfathered swaps covered by that netting agreement as “new” swaps subject to the Swap Margin Rule.
    • Margin and Capital Requirements for Covered Swap Entities – Brexit Amendment; Interim Final Rule: The Agencies' policy objective in developing the interim final rule is to address one aspect of the scenario likely to ensue, whereby entities located in the U.K. might transfer their existing swap portfolios that face counterparties located in the E.U. over to an affiliate or other related establishment located within the E.U. or the United States (U.S.). The Agencies seek to address industry concerns about the status of grandfathered swaps in this scenario, so the industry can focus on making preparations for swap transfers. These transfers, if carried out in accordance with the conditions of the interim final rule, will not trigger the application of the Swap Margin Rule to grandfathered swaps that were entered into before the compliance dates of the Swap Margin Rule.
    • Margin and Capital Requirements for Covered Swap Entities – Amendments; Final Rule: The final rule changes requirements to the Swap Margin Rule that (1) permit swaps entered into prior to an applicable compliance date (legacy swaps) to retain their legacy status in the event that they are amended to replace an interbank offered rate (IBOR) or other discontinued rate, (2) modify initial margin requirements for non-cleared swaps between covered swap entities and their affiliates, (3) introduce an additional compliance date for initial margin requirements, (4) clarify the point in time at which trading documentation must be in place, (5) permit legacy swaps to retain their legacy status in the event that they are amended due to technical amendments, notional reductions, or portfolio compression exercises, (6) make technical changes to relocate the provision within the rule addressing amendments to legacy swaps that are made to comply with the qualified financial contract rules, and (7) address comments received in response to the agencies’ publication of the interim final rule dealing with Brexit-related issues.
    • Standardized Approach for Calculating the Exposure Amount of Derivative Contracts implements the standardized approach for counterparty credit risk (SA-CCR), to calculate the exposure amount of derivative contracts for risk-based capital requirements and supplementary leverage ratio under Part 324 and for FDIC assessments under Part 327. Banking institutions are provided an option to adopt SA-CCR on the best effort basis effective March 31, 2020 (see Notification Standardized Approach for Calculating the Exposure Amount of Derivative Contracts)
    • Revision to the Consolidated Reports of Condition and Income (Call Reports) Related to the Standardized Approach for Counterparty Credit Risk (SA-CCR)

Supervisory Resources

Frequently asked questions, advisories, statements of policy, and other information issued by the FDIC alone, or on an interagency basis, provided to promote safe-and-sound operations.


Other Resources

Supplemental information and guidance related to safe and sound banking operations.


Videos/Webcasts/Teleconferences

Informational videos and recordings of prior webcasts and teleconferences.

Last Updated: July 24, 2024