Reform of prohibition on swap activity assistance

Section 716 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (15 U.S.C. 8305) is amended— (1)in subsection (b), by adding at the end the following:

(3)

Covered depository institution

The term covered depository institution means— (A)an insured depository institution; and (B)a United States uninsured branch or agency of a foreign bank that has a prudential regulator.

;

(2)in subsection (c)— (A)in the heading for such subsection, by striking

insured

and inserting

covered

; (B)by striking an insured and inserting a covered; (C)by striking such insured and inserting such covered; and (D)by striking or savings and loan holding company and inserting savings and loan holding company, or foreign banking organization (as such term is defined under Regulation K (12 C.F.R. 211.21(o))); (3)by amending subsection (d) to read as follows:

(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

Hedging and other similar risk mitigating activities directly related to the covered depository institution's activities. (B)

Non-structured finance swap activities

Acting as a swaps entity for swaps or security-based swaps other than a structured finance swap. (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

The term structured finance swap means a swap or security-based swap based on an asset-backed security (or group or index primarily comprised of asset-backed securities). (B)

Asset-backed security

The term asset-backed security has the meaning given such term under section 3(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78c(a)).

;

(4)in subsection (e), by striking an insured and inserting a covered; (5)in subsection (f)— (A)by striking an insured and inserting a covered; and (B)by striking the insured each place such term appears and inserting the covered; (6)in subsection (g), by striking insured and inserting covered; (7)in subsection (m), by striking An insured and inserting A covered; and (8)by adding at the end the following:

(n)

Foreign swap activity

(1)

In general

This section shall not apply to swap or security-based swap activity conducted outside the United States with a non-U.S. counterparty by a non-U.S. swaps entity. (2)

Definitions

For purposes of this subsection, the terms non-U.S. swaps entity and non-U.S. counterparty mean a swaps entity or counterparty, respectively, that is licensed, in the case of a foreign branch of a United States depository institution, or organized under the laws of a jurisdiction outside the United States.