WASHINGTON — The Office of the Comptroller of the Currency said Thursday it would allow more time for banks to comply with new restrictions on swaps activities.
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 have to stop or divest their swaps businesses.
The OCC, as well as the Federal Reserve Board and the Federal Deposit Insurance Corp., had previously set an effective date of July 16. But Dodd-Frank allows a bank's primary regulator to set a longer transition period to help institutions adapt.
In new guidance, the OCC said it "is prepared to consider favorably requests for a transition period." Institutions under the agency's watch can request transition periods up to two years following the official effective date. The OCC said transition periods are necessary because the new derivatives regime in Dodd-Frank is still being built, and a longer period "will mitigate operational and credit risks for insured federal depository institutions."
The OCC said written requests for longer transition periods must outline how an institution plans to comply with the new restrictions, and the risks the bank faces that would be mitigated by an extension. Written requests must be submitted by Jan. 31.