View all text of Part A [§ 8301 - § 8308]
§ 8305. Prohibition against Federal Government bailouts of swaps entities
(a) Prohibition on Federal assistance
(b) Definitions
In this section:
(1) Federal assistance
The term “Federal assistance” means the use of any advances from any Federal Reserve credit facility or discount window that is not part of a program or facility with broad-based eligibility under section 343(3)(A) of title 12, Federal Deposit Insurance Corporation insurance or guarantees for the purpose of—
(A) making any loan to, or purchasing any stock, equity interest, or debt obligation of, any swaps entity;
(B) purchasing the assets of any swaps entity;
(C) guaranteeing any loan or debt issuance of any swaps entity; or
(D) entering into any assistance arrangement (including tax breaks), loss sharing, or profit sharing with any swaps entity.
(2) Swaps entity
(A) In general
The term “swaps entity” means any swap dealer, security-based swap dealer, major swap participant, major security-based swap participant, that is registered under—
(i) the Commodity Exchange Act (7 U.S.C. 1 et seq.); or
(ii) the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.).
(B) Exclusion
(3) Covered depository institution
The term “covered depository institution” means—
(A) an insured depository institution, as that term is defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813); and
(B) a United States uninsured branch or agency of a foreign bank.
(c) Affiliates of covered depository institutions
(d) Only bona fide hedging and traditional bank activities permitted
(1) In general
The prohibition in subsection (a) shall not apply to any covered depository institution that limits its swap and security-based swap activities to the following:
(A) Hedging and other similar risk mitigation activities
(B) Non-structured finance swap activities
(C) Certain structured finance swap activities
Acting as a swaps entity for swaps or security-based swaps that are structured finance swaps, if—
(i) such structured finance swaps are undertaken for hedging or risk management purposes; or
(ii) each asset-backed security underlying such structured finance swaps is of a credit quality and of a type or category with respect to which the prudential regulators have jointly adopted rules authorizing swap or security-based swap activity by covered depository institutions.
(2) Definitions
For purposes of this subsection:
(A) Structured finance swap
(B) Asset-backed security
(e) Existing swaps and security-based swaps
(f) Transition period
(g) Excluded entities
(h) Effective date
(i) Liquidation required
(1) In general
(A) FDIC insured institutions
(B) Institutions that pose a systemic risk and are subject to heightened prudential supervision as regulated under section 5323 of title 12
(C) Non-FDIC insured, non-systemically significant institutions not subject to heightened prudential supervision as regulated under section 5323 of title 12
(2) Recovery of funds
(3) No losses to taxpayers
(j) Prohibition on unregulated combination of swaps entities and banking
(k) Rules
In prescribing rules, the prudential regulator for a swaps entity shall consider the following factors:
(1) The expertise and managerial strength of the swaps entity, including systems for effective oversight.
(2) The financial strength of the swaps entity.
(3) Systems for identifying, measuring and controlling risks arising from the swaps entity’s operations.
(4) Systems for identifying, measuring and controlling the swaps entity’s participation in existing markets.
(5) Systems for controlling the swaps entity’s participation or entry into in 3
3 So in original.
new markets and products.(l) Authority of the Financial Stability Oversight Council
(m) Ban on proprietary trading in derivatives
(Pub. L. 111–203, title VII, § 716, July 21, 2010, 124 Stat. 1648; Pub. L. 113–235, div. E, title VI, § 630, Dec. 16, 2014, 128 Stat. 2378.)