Clearing Relief Extended to Small Bank Holding Companies

The CFTC issued welcome no-action relief today in response to ABA and other industry requests to include certain bank holding companies (BHCs) and savings and loan holding companies (SLHCs) within the “small bank” clearing relief available under CFTC Regulation 50.50(d).  The CFTC granted this request in No-Action Letter 16-01 under certain conditions.

There exists a meaningful need for holding companies to hedge their liabilities.  Typically, these liabilities have been comprised of Trust Preferred Debt, Subordinated Debt, or Holding Company Loans.  Due to the uncertainty that existed prior to this no-action relief, bank holding company hedging activity had been very minimal to non-existent over the last couple of years.  This is a welcome relief for such counterparties who are looking to reevaluate their hedging needs at the holding company level without being compelled to clear such hedging needs.

We present the details around this rule and the conditions under which this no-action relief is available.  To access this regulatory research piece.

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