On June 5, 2013, the Federal Reserve Board (Fed) approved an interim final rule (with request for comment by August 4, 2013) on the treatment of uninsured US branches and agencies of foreign banks under section 716 of the Dodd-Frank Act - the so-called Swaps Pushout rule. Effective immediately, the interim final rule treats uninsured US branches and agencies of foreign banking organizations (FBO branches and agencies) the same as US insured depository institutions (IDIs) under Section 716. This means FBO branches and agencies will benefit from the same exemptions, transition periods and grandfathering provisions in Section 716 for IDIs.
It is not clear why it took the Fed almost three years to arrive at this result (only after the OCC provided relief to the US banks), especially given that the disparate treatment was widely viewed as a legislative drafting error that the regulators were inevitably going to have to resolve through interpretation – and not by relying on a legislative fix through the political process. It was a long period of limbo for the FBOs – too long in fact – with the Swaps Pushout requirements becoming effective on July 16, 2013. At least in the end, justice delayed is not justice denied.