The CFTC has adopted a final rule that provides a swaps-clearing exemption for cooperatives -- including Farm Credit System banks and credit unions -- regardless of their asset size. The rule treats FCS institutions and credit unions differently from banks, as banks are exempt from clearing requirements only if they have total assets of $10 billion or less.
The final rule permits a qualifying cooperative to avoid clearing swaps subject to the clearing requirements in the Dodd-Frank Act, “provided that the cooperative’s members are either non-financial entities or other cooperatives whose members are non-financial entities.” The swap must also be entered into in connection with originating loans to co-op members or hedging risk related to member loans or swaps.
ABA has strongly urged the CFTC to not to treat banks and cooperatives differently, and many ABA members advocated for a level playing field with CFTC officials. “Clearing requirements are both complex and costly, so the proposed exemption would give all Farm Credit banks, credit unions, and other cooperatives a competitive advantage,” ABA said in a 2012 comment letter. “There is simply no policy justification for granting large cooperatives ... a broader clearing exemption than banks.”
Read the final rule.