(a) (1) A covered swap entity shall calculate on each business day
an initial margin collection amount for each counterparty that is
a swap entity or financial end user with a material swaps exposure
and an affiliate of the covered swap entity.
(2) If the aggregate of all initial margin
collection amounts calculated under paragraph (a)(1) of this section
does not exceed 15 percent of the covered swap entity’s tier 1 capital,
the requirements for a covered swap entity to collect initial margin
under section 237.3(a) do not apply with respect to any non-cleared
swap or non-cleared security-based swap with a counterparty that is
an affiliate.
(3) On each business
day that the aggregate of all initial margin collection amounts calculated
under paragraph (a)(1) of this section exceeds 15 percent of the covered
swap entity’s tier 1 capital:
(i) The covered swap entity shall collect
initial margin under section 237.3(a) for each additional non-cleared
swap and non-cleared security-based swap executed that business day
with a counterparty that is a swap entity or financial end user with
a material swaps exposure and an affiliate of the covered swap entity,
commencing on the day after execution and continuing on a daily basis
as required under section 237.3(c), until the earlier of:
(A) The termination date of such non-cleared
swap or non-cleared security-based swap, or
(B) The business day on which the aggregate
of all initial margin collection amounts calculated under paragraph
(a)(1) of this section falls below 15 percent of the covered swap
entity’s tier 1 capital;
(ii) Notwithstanding section 237.7(b),
to the extent the covered swap entity collects initial margin pursuant
to paragraph (a)(3)(i) of this section in the form of collateral other
than cash collateral, the custodian for such collateral may be the
covered swap entity or an affiliate of the covered swap entity; and
(4) For purposes of this
paragraph (a), “tier 1 capital” means the sum of common equity tier
1 capital as defined in 12 CFR 217.20(b) and additional tier 1 capital
as defined in 12 CFR 217.20(c), as reported in the institution’s most
recent Consolidated Reports of Income and Condition (Call Report).
(5) If any subsidiary of the covered
swap entity (including a subsidiary described in section 237.9(h))
executes any non-cleared swap or non-cleared security-based swap with
any counterparty that is a swap entity or financial end user with
a material swaps exposure and an affiliate of the covered swap entity:
(i) The covered swap
entity shall treat such non-cleared swap or security-based swap
as its own for purposes of this paragraph (a); and
(ii) If the subsidiary is itself a covered
swap entity, the compliance by its parent affiliated covered swap
entity with this paragraph (a)(5) shall be deemed to establish the
subsidiary’s compliance with the requirements of this paragraph (a)
and to exempt the subsidiary from the requirements for a covered swap
entity to collect initial margin under section 237.3(a) from an affiliate.
(b) The requirement for a covered swap
entity to post initial margin under section 237.3(b) does not apply
with respect to any non-cleared swap or non-cleared security-based
swap with a counterparty that is an affiliate.
(c) Section
237.3(d) shall apply to a counterparty that is an affiliate in the
same manner as it applies to any counterparty that is neither a financial
end user without a material swap exposure nor a swap entity.
(d) For purposes of this section,
(1) An affiliate means:
(i) An affiliate as defined in section
237.2; or
(ii) Any company that
controls, is controlled by, or is under common control with the covered
swap entity through the direct or indirect exercise of controlling
influence over the management or policies of the controlled company.
(2) A subsidiary means:
(i) A subsidiary as defined in section 237.2; or
(ii) Any company that is controlled
by the covered swap entity through the direct or indirect exercise
of controlling influence over the management or policies of the controlled
company.
