The Dodd-Frank Act mandates new clearing requirements for swaps but provides an exception for “end users” that use swaps to hedge or mitigate commercial risk. The Dodd-Frank Act also requires the CFTC to consider a clearing exemption for certain banks, savings associations, farm credit institutions, and credit unions. [The CFTC] has adopted a final rule exempting these institutions if they have total assets of $10 billion or less. On the same day, the CFTC proposed a clearing exemption for all cooperatives regardless of their asset size.Read the full comment letter.
The CFTC’s rationale for the proposed exemption is that cooperatives are owned by “end users” and, therefore, should receive an end user “pass through” because they face the larger financial markets on behalf of end users. Yet many banks, including many with assets over $10 billion, similarly face the larger financial markets on behalf of end users. Cooperatives—including a Farm Credit bank with more than $90 billion in assets or a credit union with nearly $50 billion in assets—should not be given more favorable treatment than banks.
Friday, August 17, 2012
ABA Opposes CFTC’s Swap Exemption for Cooperatives
ABA has submitted a comment letter to the CFTC regarding the proposed swaps clearing exemption entered into by certain cooperatives, such as Farm Credit banks and credit unions.