race against time to update documentation
Last month's Federal Deposit Insurance Corporation (FDIC)
approval of a new rule establishing margin requirements for
swaps transactions indicates a softening from the regulator.
But the changes will have a major impact on costs,
documentation and systems.
The rule will require banks to hold greater margins, or
collateral, against swaps transactions that don't go through a
clearinghouse. Counsel expect it to pose additional costs for
market participants, and require changes in established
documentation and practices.
The Dodd-Frank Act mandated new rules be written on swaps
transactions. For one, the Act required all sufficiently
standardised swaps to be cleared through a registered
derivatives clearing organisation or clearing agency. However,
some swaps are non-cleared. Dodd-Frank required new rules be
written on initial and variation margin requirements for such
The new FDIC rule, issued jointly with the Office of the