Sec. 203. Banning closeout netting for capital purposes; ensuring minimum capital
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Section 165(b)(1) of the Financial Stability Act of 2010 ( 12 U.S.C. 5365(b)(1) ) is amended by adding at the end the following: In this subparagraph, the term covered financial institution means— a swap dealer registered under section 4s of the Commodity Exchange Act ( 7 U.S.C. 6s ); a security-based swap dealer, as defined in section 3(a) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78c(a) ); an insured depository institution, as defined in section 3 of the Federal Deposit Insurance Act ( 12 U.S.C. 1813 ); a nonbank financial company supervised by the Board of Governors; a major swap participant, as defined in section 1a of the Commodity Exchange Act ( 7 U.S.C. 1a ); a bank holding company described in subsection (a); and any subsidiary of a bank holding company described in subsection (a).
For purposes of determining the amount of capital required under the risk-based capital requirements and leverage limits required under subparagraph (A)(i), consolidated assets shall include the fair value and potential future exposure of derivatives exposures, without recognizing the benefits of any netting arrangement, unless the netting arrangement— is documented under a formal master netting agreement or other formal arrangement with a derivatives clearing organization registered with a primary Federal financial regulatory agency; and meets financial standards approved by the Board of Governors and the Corporation; or is documented under a formal master netting agreement with a counterparty; and requires the covered financial institution, as a matter of ongoing business practice, to— exchange collateral daily for the fulfillment of variation margin requirements on a net basis; and fulfill all contractual payment requirements, including payments for contract determination, on a net basis, with such net exchange of collateral and payments encompassing all derivatives exposures covered by the formal arrangement.
For purposes of determining the amount of capital required under leverage limits required under subparagraph (A)(i)— total derivatives risk exposures shall not be assessed at a level less than 2 percent of total gross notional derivatives contracts to which the covered financial institution, as defined in subparagraph (C)(i), is a party; and such leverage limits shall not vary for derivatives exposures as compared to other assets. .
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Sec. 203
Banning closeout netting for capital purposes; ensuring minimum capital
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