The CFTC last week published a proposed rule that would exempt cooperative lenders from Dodd-Frank Act clearing requirements for swaps entered into with eligible farmer and business borrowers, or used to hedge balance sheet risk. Cooperative lenders include, among others, Farm Credit System institutions and credit unions.
Banks are not eligible for a clearing exemption if they have assets of more than $10 billion. Cooperative lenders, however, would be eligible regardless of their asset size -- and that would include one Farm Credit System bank with nearly $90 billion in assets.
Since clearing requirements are both complex and costly, the proposed exemption would give Farm Credit System institutions and credit unions that use swaps a competitive advantage over the hundreds of ABA member banks not eligible for such an exemption.
Comments on the proposal are due August 16.
Read the proposal.