The Commodity Futures Trading Commission today voted to set the swap dealer de minimis threshold at $8 billion on a permanent basis. The threshold had been scheduled to drop to $3 billion at the end of 2019, but Chairman Christopher Giancarlo had pledged a permanent resolution before then.
“The data shows quite clearly that a drop in the de minimis definition from $8 billion to $3 billion would not have an appreciable impact on coverage of the marketplace,” said Giancarlo. “On the other hand, the drop in the threshold would pose unnecessary burdens for non-financial companies that engage in relatively small levels of swap dealing to manage business risk for themselves and their customers.”
The changes proposed today would also modify the CFTC’s current regulation that excludes swaps of insured depository institutions made in connection with originating loans with their customers from counting toward the $8 billion threshold. “These types of changes will allow small and regional banks to further serve customers’ needs without the added burden of unnecessary regulation and associated compliance costs,” Giancarlo added.
The American Bankers Association has strongly advocated for maintaining or raising the de minimis threshold, noting that lowering it could limit the ability of many commercial end users to access the swaps market in order to manage risk responsibly. ABA will continue to engage with the CFTC during the public comment process. For more information, contact ABA’s Ananda Radhakrishnan.
In related news, the CFTC also voted to approve the joint Volcker Rule reforms that were issued by the Federal Reserve, FDIC and OCC last week and covered in ABA Daily Newsbytes. The Securities and Exchange Commission is set to meet tomorrow and will be the final agency to approve formally the Volcker updates.