Fed unveils “swaps pushout” regulations

Under the financial reform law, banks whose deposits are federally insured or who benefit from discount window lending need to be out of the swaps business by July 16, or be approved for a 24-month transition period.

During the transition, banks could move their derivative units to affiliate companies that do not receive federal assistance.

The so-called “swaps pushout” provision was created to clamp down on swaps trading, which contributed to the 2008 economic crisis.

The interim final rule issued Wednesday clarifies that U.S. branches of foreign banks would be eligible for the 2-year transition period and establishes a process by which state member banks and uninsured state branches can apply.

While the rule takes effect immediately, the Fed will accept comments from members of the public and interested parties through Aug. 4, and could make changes to the regulations.