Cracks in QE3; Swap Regs Deferred; Lovable Checking Fees

Swap Delay: In yet another Dodd-Frank deadline deferred (as of Jan. 2, 60% of the act's 237 rule-making deadlines had been missed), commercial banks may get as much as two extra years to comply with the requirements that they wall off some derivatives trades from units backed by federal deposit insurance, the Office of the Comptroller of the Currency said in a notice released Thursday.

Under the derivatives provisions of the Dodd-Frank act, depository institutions cannot use the federal assistance they receive — such as federal deposit insurance or access to the discount window — to support certain swaps activities. The new rules will in effect force some banks to stop swaps operations or divest from the business.

The OCC, as well as the Federal Reserve Board and the Federal Deposit Insurance Corp., had previously set an effective date of July 16 for the swaps rule. But Dodd-Frank allows a bank's primary regulator to set a longer transition period, and it now appears that the deadline may be moved back to July 2015, Bloomberg reports.

The so-called push-out provision of Dodd-Frank requires that equity, some commodity and non-cleared credit derivatives be "pushed out" to separate affiliates without federal assistance.

Before that can happen, 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 its notice.

The U.S. House Financial Services Committee last February approved legislation that would remove part of the push-out rule and let banks keep commodity and equity derivatives in federally insured units. Regulators, including Federal Reserve Chairman Ben Bernanke, had opposed the provision when it was included in Dodd-Frank, saying it would drive derivatives to less-regulated entities, according to Bloomberg.

The delay will no doubt be received warmly by Wall Street's biggest banks. JPMorgan (JPM) had 99% of its $72 trillion in notional swaps trades in its commercial bank in the third quarter of 2012, according to Bloomberg, citing the OCC's quarterly derivatives report. Bank of America (BAC) reportedly had 68% of its $64 trillion in its commercial bank.

Less happy are observers who regard it as critical to separate derivatives businesses from federal insurance to avert the need for taxpayers to bail out Wall Street yet again during the next crisis.

"The procrastination of both regulators and the banks on this portion of Dodd-Frank has been pretty amazing," Marcus Stanley, policy director for Americans for Financial Reform, a coalition including the AFL-CIO labor federation, told Bloomberg. "The swaps-pushout provision is a really important part and something that absolutely should be a central part of the regulatory framework." Bloomberg, American Banker

Wall Street Journal

If misery really does love company, beleaguered Swiss banking giant UBS will gain a modicum of satisfaction from the woes that have befallen its native nation's oldest bank.

Wegelin & Co., founded in 1741, pleaded guilty to criminal conspiracy in the U.S. on Thursday, admitting that for years it helped wealthy Americans dodge tens of millions of dollars in taxes by hiding their income in secret accounts.

Wegelin is the latest Swiss bank to reach a deal with U.S. prosecutors as they crack down on rich Americans who did dubious tax planning with the help of secret foreign accounts and accommodating offshore bankers. Three Wegelin bankers also were charged criminally in the U.S. last year.