Affiliate. A company is an affiliate
of another company if:
(1) Either company consolidates the other on financial statements
prepared in accordance with U.S. Generally Accepted Accounting Principles,
the International Financial Reporting Standards, or other similar
standards;
(2) Both companies are
consolidated with a third company on a financial statement prepared
in accordance with such principles or standards;
(3) For a company that is not subject to
such principles or standards, if consolidation as described in paragraph
(1) or (2) of this definition would have occurred if such principles
or standards had applied; or
(4)
The Board has determined that a company is an affiliate of another
company, based on Board’s conclusion that either company provides
significant support to, or is materially subject to the risks or losses
of, the other company.
Bank holding company has the meaning specified in section 2 of the Bank Holding Company
Act of 1956 (12 U.S.C. 1841).
Broker has the meaning
specified in section 3(a)(4) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(4)).
Business day means any day other
than a Saturday, Sunday, or legal holiday.
Clearing agency has the meaning specified in section 3(a)(23) of the Securities
Exchange Act of 1934 (15 U.S.C. 78c(a)(23)).
Company means a corporation, partnership, limited liability company, business
trust, special purpose entity, association, or similar organization.
Counterparty means, with respect to any non-cleared swap
or non-cleared security-based swap to which a person is a party, each
other party to such non-cleared swap or non-cleared security-based
swap.
Covered swap entity means any swap entity that
is a:
(1) State member
bank (as defined in 12 CFR 208.2(g));
(2) Bank holding company (as defined in 12 U.S.C. 1841);
(3) Savings and loan holding company (as
defined in 12 U.S.C. 1467a);
(4)
Foreign banking organization (as defined in 12 CFR 211.21(o));
(5) Foreign bank that does not operate
an insured branch;
(6) State branch
or state agency of a foreign bank (as defined in 12 U.S.C. 3101(b)(11)
and (12));
(7) Edge or agreement
corporation (as defined in 12 CFR 211.1(c)(2) and (3)); or
(8) Covered swap entity as determined by
the Board. Covered swap entity would not include an affiliate of an
entity listed in paragraphs (1) through (7) of this definition for
which the Office of the Comptroller of the Currency or the Federal
Deposit Insurance Corporation is the prudential regulator or that
is required to be registered with the U.S. Commodity Futures Trading
Commission as a swap dealer or major swap participant or with the
U.S. Securities and Exchange Commission as a security-based swap dealer
or major security-based swap participant.
Cross-currency
swap means a swap in which one party exchanges with another party
principal and interest rate payments in one currency for principal
and interest rate payments in another currency, and the exchange of
principal occurs on the date the swap is entered into, with a reversal
of the exchange of principal at a later date that is agreed upon when
the swap is entered into.
Currency of settlement means
a currency in which a party has agreed to discharge payment obligations
related to a non-cleared swap, a non-cleared security-based swap,
a group of non-cleared swaps, or a group of non-cleared security-based
swaps subject to a master agreement at the regularly occurring dates
on which such payments are due in the ordinary course.
Day
of execution means the calendar day at the time the parties enter
into a non-cleared swap or non-cleared security-based swap, provided:
(1) If each party is in a
different calendar day at the time the parties enter into the non-cleared
swap or non-cleared security-based swap, the day of execution is deemed
the latter of the two dates; and
(2) If a non-cleared swap or non-cleared security-based swap is:
(i) Entered into after
4:00 p.m. in the location of a party; or
(ii) Entered into on a day that is not
a business day in the location of a party, then the non-cleared swap
or non-cleared security-based swap is deemed to have been entered
into on the immediately succeeding day that is a business day for
both parties, and both parties shall determine the day of execution
with reference to that business day.
Dealer has the meaning specified in section 3(a)(5) of the
Securities Exchange Act of 1934 (15 U.S.C. 78c(a)(5)).
Depository
institution has the meaning specified in section 3(c) of the Federal
Deposit Insurance Act (12 U.S.C. 1813(c)).
Derivatives clearing
organization has the meaning specified in section 1a(15) of the
Commodity Exchange Act of 1936 (7 U.S.C. 1a(15)).
Eligible
collateral means collateral described in section 237.6.
Eligible master netting agreement means a written, legally
enforceable agreement provided that:
(1) The agreement creates a single legal
obligation for all individual transactions covered by the agreement
upon an event of default following any stay permitted by paragraph
(2) of this definition, including upon an event of receivership, conservatorship,
insolvency, liquidation, or similar proceeding, of the counterparty;
(2) The agreement provides the covered
swap entity the right to accelerate, terminate, and close-out on a
net basis all transactions under the agreement and to liquidate or
set-off collateral promptly upon an event of default, including upon
an event of receivership, conservatorship, insolvency, liquidation,
or similar proceeding, of the counterparty, provided that, in any
such case,
(i) Any
exercise of rights under the agreement will not be stayed or avoided
under applicable law in the relevant jurisdictions, other than:
(A) In receivership, conservatorship,
or resolution under the Federal Deposit Insurance Act (12 U.S.C. 1811 et seq.), title II of the Dodd-Frank Wall Street Reform and Consumer
Protection Act (12 U.S.C. 5381 et seq.), the Federal Housing
Enterprises Financial Safety and Soundness Act of 1992, as amended
(12 U.S.C. 4617), or the Farm Credit Act of 1971, as amended (12 U.S.C.
2183 and 2279cc), or laws of foreign jurisdictions that are substantially
similar to the U.S. laws referenced in this paragraph (2)(i)(A) in
order to facilitate the orderly resolution of the defaulting counterparty;
or
(B) Where the agreement is subject
by its terms to, or incorporates, any of the laws referenced in paragraph
(2)(i)(A) of this definition; and
(ii) The agreement may limit the right
to accelerate, terminate, and close-out on a net basis all transactions
under the agreement and to liquidate or set-off collateral promptly
upon an event of default of the counterparty to the extent necessary
for the counterparty to comply with the requirements of part 47, subpart
I of part 252 or part 382 of title 12, as applicable;
(3) The agreement does not contain
a walkaway clause (that is, a provision that permits a non-defaulting
counterparty to make a lower payment than it otherwise would make
under the agreement, or no payment at all, to a defaulter or the estate
of a defaulter, even if the defaulter or the estate of the defaulter
is a net creditor under the agreement); and
(4) A covered swap entity that relies on
the agreement for purposes of calculating the margin required by this
part must:
(i) Conduct
sufficient legal review to conclude with a well-founded basis (and
maintain sufficient written documentation of that legal review) that:
(A) The agreement meets
the requirements of paragraph (2) of this definition; and
(B) In the event of a legal challenge (including
one resulting from default or from receivership, conservatorship,
insolvency, liquidation, or similar proceeding), the relevant court
and administrative authorities would find the agreement to be legal,
valid, binding, and enforceable under the law of the relevant jurisdictions;
and
(ii) Establish
and maintain written procedures to monitor possible changes in relevant
law and to ensure that the agreement continues to satisfy the requirements
of this definition.
Financial end
user means:
(1) Any
counterparty that is not a swap entity and that is:
(i) A bank holding company or an
affiliate thereof; a savings and loan holding company; a U.S. intermediate
holding company established or designated for purposes of compliance
with 12 CFR 252.153; or a nonbank financial institution supervised
by the Board of Governors of the Federal Reserve System under title
I of the Dodd-Frank Wall Street Reform and Consumer Protection Act
(12 U.S.C. 5323);
(ii) A depository
institution; a foreign bank; a Federal credit union or State credit
union as defined in section 2 of the Federal Credit Union Act (12
U.S.C. 1752(1) & (6)); an institution that functions solely in
a trust or fiduciary capacity as described in section 2(c)(2)(D) of
the Bank Holding Company Act (12 U.S.C. 1841(c)(2)(D)); an industrial
loan company, an industrial bank, or other similar institution described
in section 2(c)(2)(H) of the Bank Holding Company Act (12 U.S.C. 1841(c)(2)(H));
(iii) An entity that is state-licensed
or registered as:
(A)
A credit or lending entity, including a finance company; money lender;
installment lender; consumer lender or lending company; mortgage lender,
broker, or bank; motor vehicle title pledge lender; payday or deferred
deposit lender; premium finance company; commercial finance or lending
company; or commercial mortgage company; except entities registered
or licensed solely on account of financing the entity’s direct sales
of goods or services to customers;
(B) A money services business, including a check casher; money transmitter;
currency dealer or exchange; or money order or traveler’s check issuer;
(iv) A regulated
entity as defined in section 1303(20) of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992, as amended (12 U.S.C.
4502(20)) or any entity for which the Federal Housing Finance Agency
or its successor is the primary federal regulator;
(v) Any institution chartered in accordance
with the Farm Credit Act of 1971, as amended, 12 U.S.C. 2001 et
seq., that is regulated by the Farm Credit Administration;
(vi) A securities holding company;
a broker or dealer; an investment adviser as defined in section 202(a)
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)); an investment
company registered with the U.S. Securities and Exchange Commission
under the Investment Company Act of 1940 (15 U.S.C. 80a-1et seq .); or a company that has elected to be regulated as a business
development company pursuant to section 54(a) of the Investment Company
Act of 1940 (15 U.S.C. 80a-53(a));
(vii) A private fund as defined in section 202(a) of the Investment
Advisers Act of 1940 (15 U.S.C. 80b-2(a)); an entity that would be
an investment company under section 3 of the Investment Company Act
of 1940 (15 U.S.C. 80a-3) but for section 3(c)(5)(C); or an entity
that is deemed not to be an investment company under section 3 of
the Investment Company Act of 1940 pursuant to Investment Company
Act Rule 3a-7 (17 CFR 270.3a-7) of the U.S. Securities and Exchange
Commission;
(viii) A commodity
pool, a commodity pool operator, or a commodity trading advisor as
defined, respectively, in section 1a(10), 1a(11), and 1a(12) of the
Commodity Exchange Act of 1936 (7 U.S.C. 1a(10), 1a(11), and 1a(12));
a floor broker, a floor trader, or introducing broker as defined,
respectively, in 1a(22), 1a(23) and 1a(31) of the Commodity Exchange
Act of 1936 (7 U.S.C. 1a(22), 1a(23), and 1a(31)); or a futures commission
merchant as defined in 1a(28) of the Commodity Exchange Act of 1936
(7 U.S.C. 1a(28));
(ix) An employee
benefit plan as defined in paragraphs (3) and (32) of section 3 of
the Employee Retirement Income and Security Act of 1974 (29 U.S.C.
1002);
(x) An entity that is
organized as an insurance company, primarily engaged in writing insurance
or reinsuring risks underwritten by insurance companies, or is subject
to supervision as such by a State insurance regulator or foreign insurance
regulator;
(xi) An entity, person
or arrangement that is, or holds itself out as being, an entity, person,
or arrangement that raises money from investors, accepts money from
clients, or uses its own money primarily for the purpose of investing
or trading or facilitating the investing or trading in loans, securities,
swaps, funds or other assets for resale or other disposition or otherwise
trading in loans, securities, swaps, funds or other assets; or
(xii) An entity that would be a
financial end user described in paragraph (1) of this definition or
a swap entity, if it were organized under the laws of the United States
or any State thereof.
(2) The term “financial end user” does not include any counterparty
that is:
(i) A sovereign
entity;
(ii) A multilateral development
bank;
(iii) The Bank for International
Settlements;
(iv) An entity that
is exempt from the definition of financial entity pursuant to section
2(h)(7)(C)(iii) of the Commodity Exchange Act of 1936 (7 U.S.C. 2(h)(7)(C)(iii))
and implementing regulations; or
(v) An affiliate that qualifies for the exemption from clearing pursuant
to section 2(h)(7)(D) of the Commodity Exchange Act of 1936 (7 U.S.C.
2(h)(7)(D)) or section 3C(g)(4) of the Securities Exchange Act of
1934 (15 U.S.C. 78c-3(g)(4)) and implementing regulations.
Foreign bank means an organization that is organized
under the laws of a foreign country and that engages directly in the
business of banking outside the United States.
Foreign exchange
forward has the meaning specified in section 1a(24) of the Commodity
Exchange Act of 1936 (7 U.S.C. 1a(24)).
Foreign exchange
swap has the meaning specified in section 1a(25) of the Commodity
Exchange Act of 1936 (7 U.S.C. 1a(25)).
Initial margin means the collateral as calculated in accordance with section 237.8
that is posted or collected in connection with a non-cleared swap
or non-cleared security-based swap.
Initial margin collection
amount means:
(1) In
the case of a covered swap entity that does not use an initial margin
model, the amount of initial margin with respect to a non-cleared
swap or non-cleared security-based swap that is required under appendix
A of this subpart; and
(2) In the
case of a covered swap entity that uses an initial margin model pursuant
to section 237.8, the amount of initial margin with respect to a non-cleared
swap or non-cleared security-based swap that is required under the
initial margin model.
Initial margin model means an internal risk management model that:
(1) Has been developed and designed to
identify an appropriate, risk-based amount of initial margin that
the covered swap entity must collect with respect to one or more non-cleared
swaps or non-cleared security-based swaps to which the covered swap
entity is a party; and
(2) Has been
approved by the Board pursuant to section 237.8.
Initial margin threshold amount means an aggregate credit
exposure of $50 million resulting from all non-cleared swaps and non-cleared
security-based swaps between a covered swap entity and its affiliates,
and a counterparty and its affiliates. For purposes of this calculation,
an entity shall not count a swap or security-based swap that is exempt
pursuant to section 237.1(d).
Major currency means:
(1) United States Dollar
(USD);
(2) Canadian Dollar (CAD);
(3) Euro (EUR);
(4) United Kingdom Pound (GBP);
(5) Japanese Yen (JPY);
(6) Swiss Franc (CHF);
(7) New Zealand Dollar (NZD);
(8) Australian Dollar (AUD);
(9) Swedish Kronor (SEK);
(10) Danish Kroner (DKK);
(11) Norwegian Krone (NOK); or
(12) Any other currency as determined by
the Board.
Margin means initial margin and
variation margin.
Market intermediary means a securities
holding company; a broker or dealer; a futures commission merchant
as defined in 1a(28) of the Commodity Exchange Act of 1936 (7 U.S.C.
1a(28)); a swap dealer as defined in section 1a(49) of the Commodity
Exchange Act of 1936 (7 U.S.C. 1a(49)); or a security-based swap dealer
as defined in section 3(a)(71) of the Securities Exchange Act of 1934
(15 U.S.C. 78c(a)(71)).
Material swaps exposure for an entity means that an entity and its affiliates have an average daily aggregate
notional amount of non-cleared swaps, non-cleared security-based swaps,
foreign exchange forwards, and foreign exchange swaps with all counterparties
for June, July, and August of the previous calendar year that exceeds
$8 billion, where such amount is calculated only for business days.
An entity shall count the average daily aggregate notional amount
of a non-cleared swap, a non-cleared security-based swap, a foreign
exchange forward or a foreign exchange swap between the entity and
an affiliate only one time. For purposes of this calculation, an entity
shall not count a swap or security-based swap that is exempt pursuant
to section 237.1(d).
Multilateral development bank means
the International Bank for Reconstruction and Development, the Multilateral
Investment Guarantee Agency, the International Finance Corporation,
the Inter-American Development Bank, the Asian Development Bank, the
African Development Bank, the European Bank for Reconstruction and
Development, the European Investment Bank, the European Investment
Fund, the Nordic Investment Bank, the Caribbean Development Bank,
the Islamic Development Bank, the Council of Europe Development Bank,
and any other entity that provides financing for national or regional
development in which the U.S. government is a shareholder or contributing
member or which the Board determines poses comparable credit risk.
Non-cleared swap means a swap that is not cleared by a
derivatives clearing organization registered with the Commodity Futures
Trading Commission pursuant to section 5b(a) of the Commodity Exchange
Act of 1936 (7 U.S.C. 7a-1(a)) or by a clearing organization that
the Commodity Futures Trading Commission has exempted from registration
by rule or order pursuant to section 5b(h) of the Commodity Exchange
Act of 1936 (7 U.S.C. 7a-1(h)).
Non-cleared security-based
swap means a security-based swap that is not, directly or indirectly,
submitted to and cleared by a clearing agency registered with the
U.S. Securities and Exchange Commission pursuant to section 17A of
the Securities Exchange Act of 1934 (15 U.S.C. 78q-1) or by a clearing
agency that the U.S. Securities and Exchange Commission has exempted
from registration by rule or order pursuant to section 17A of the
Securities Exchange Act of 1934 (15 U.S.C. 78q-1).
Prudential
regulator has the meaning specified in section 1a(39) of the Commodity
Exchange Act of 1936 (7 U.S.C. 1a(39)).
Savings and loan
holding company has the meaning specified in section 10(n) of
the Home Owners’ Loan Act (12 U.S.C. 1467a(n)).
Securities
holding company has the meaning specified in section 618 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C.
1850a).
Security-based swap has the meaning specified
in section 3(a)(68) of the Securities Exchange Act of 1934 (15 U.S.C.
78c(a)(68)).
Sovereign entity means a central government
(including the U.S. government) or an agency, department, ministry,
or central bank of a central government.
State means
any State, commonwealth, territory, or possession of the United States,
the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth
of the Northern Mariana Islands, American Samoa, Guam, or the United
States Virgin Islands.
Subsidiary. A company is a subsidiary
of another company if:
(1) The company is consolidated by the other company on financial
statements prepared in accordance with U.S. Generally Accepted Accounting
Principles, the International Financial Reporting Standards, or other
similar standards;
(2) For a company
that is not subject to such principles or standards, if consolidation
as described in paragraph (1) of this definition would have occurred
if such principles or standards had applied; or
(3) The Board has determined that the company
is a subsidiary of another company, based on Board’s conclusion that
either company provides significant support to, or is materially subject
to the risks of loss of, the other company.
Swap has the meaning specified in section 1a(47) of the Commodity Exchange
Act of 1936 (7 U.S.C. 1a(47)).
Swap entity means a person
that is registered with the Commodity Futures Trading Commission as
a swap dealer or major swap participant pursuant to the Commodity
Exchange Act of 1936 (7 U.S.C. 1 et seq.), or a person that
is registered with the U.S. Securities and Exchange Commission as
a security-based swap dealer or a major security-based swap participant
pursuant to the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
U.S. government-sponsored
enterprise means an entity established or chartered by the U.S.
government to serve public purposes specified by federal statute but
whose debt obligations are not explicitly guaranteed by the full faith
and credit of the U.S. government.
Variation margin means
collateral provided by one party to its counterparty to meet the performance
of its obligations under one or more non-cleared swaps or non-cleared
security-based swaps between the parties as a result of a change in
value of such obligations since the last time such collateral was
provided.
Variation margin amount means the cumulative
mark-to-market change in value to a covered swap entity of a non-cleared
swap or non-cleared security-based swap, as measured from the date
it is entered into (or, in the case of a non-cleared swap or non-cleared
security-based swap that has a positive or negative value to a covered
swap entity on the date it is entered into, such positive or negative
value plus any cumulative mark-to-market change in value to the covered
swap entity of a non-cleared swap or non-cleared security-based swap
after such date), less the value of all variation margin previously collected,
plus the value of all variation margin previously posted with respect
to such non-cleared swap or non-cleared security-based swap.
