ABA Wins Swaps Clearing Relief for Community Bank Holding Companies

At the request of ABA’s Center for Bank Derivatives Policy, the Commodity Futures Trading Commission on Friday released a no-action letter to ensure that bank and savings and loan holding companies can enter into swaps and benefit from the same end-user treatment as the small banks and thrifts they own.

Due to a drafting error in the Dodd-Frank Act, smaller BHCs and S&LHCs may have been prevented from using interest rate swaps to hedge their risk unless they undertook the cost-prohibitive step of clearing those swaps.

This relief will assist hundreds of community bank holding companies that are currently hedging with swaps and may have been unable to renew these contracts. It gives many more community banks an important tool to manage interest rate risk in the future. For more information, contact ABA’s Shaun Kern.