The Commodity Futures Trading Commission (CFTC) adopted the final rule for the de minimis exception for swaps entered into by Insured Depository Institutions (IDIs) in connection with loans to customers.
“This proposal will allow small and medium size commercial borrowers – manufacturers, home builders, agricultural cooperatives, community hospitals and small municipalities – to conduct prudent risk management that is difficult for them under the current rule,” CFTC Chairman J. Christopher Giancarlo said following the adoption of the rule this week. “Today’s rule is about prudent risk management by America’s small business borrowers and job creators. It is about investment in local communities in the real economy. It is about increasing prosperity and employing our fellow Americans. Frankly, things just don’t get more important than that.”
This rule is an amendment to the de minimis exception within the swap dealer definition in the commission’s regulations. It is designed to enable small and medium-size commercial borrowers to manage risk and promote investment. The CFTC expects that the amendment will facilitate the provision of swaps by IDIs, particularly small and mid-sized banks, to their loan customers.
“We applaud the CFTC for today’s final rule, which will facilitate the ability of insured depository institutions to help their customers manage risk by offering swaps in connection with their loans,” Rob Nichols, president and CEO of the American Bankers Association, said. “Today’s action – which ABA has long supported – will ensure businesses can retain these activities within the banking system rather than being forced into more costly alternatives to hedge risk. This action will further promote greater financial efficiency and economic growth within the parameters of sound risk management.”