Treatment of Inter-Affiliate Transactions Under the Dodd-Frank Act

Summary

SIFMA, the ABA Securities Association, the American Council of Life Insurers (ACLI), the Futures Industry Association (FIA), the Institute of International Bankers (IIB), the International Swaps and Derivatives Association, Inc. (ISDA), and The Financial Services Roundtable (FSR) provide comments to the Commodity Futures Trading Commission (CFTC), the Securities and Exchange Commission (SEC), the Board of Governors of the Federal Reserve System (Federal Reserve), the Office of the Comptroller of the Currency (OCC), the Federal Deposit Insurance Corporation (FDIC), the Federal Housing Finance Agency (FHFA), and the Farm Credit Association on the treatment of inter-affiliate transactions under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act).

The groups note that virtually none of the proposed rules governing swaps regulation under the Dodd-Frank Act address how they will apply to inter-affiliate transactions.  Silence about the treatment of inter-affiliate transactions could imply that all of the rules apply to them equally. Such application could have the counterproductive effect of lessening market transparency, increasing risk within individual institutions, increasing costs generally and increasing overall market risk. The group offers context about how inter-affiliate swaps are used by financial institutions and customers and to suggest a workable framework for the treatment of inter-affiliate trades.

Excerpt

ABA Securities Association

American Council of Life Insurers

Financial Services Roundtable

Futures Industry Association

Institute of International Bankers

International Swaps and Derivatives Association

Securities Industry and Financial Markets Association

September 8, 2011

Mr. David A. Stawick

Secretary

Commodity Futures Trading Commission

Three Lafayette Centre

1155 21st Street, N.W.

Washington, DC 20581

Ms. Elizabeth M. Murphy

Secretary

Securities and Exchange

Commission

100 F Street, N.E.

Washington, DC 20549-1090

Ms. Jennifer J. Johnson

Secretary

Board of Governors of the Federal

Reserve System

20th Street and Constitution Ave., N.W.

Washington, DC 20551

Office of the Comptroller of the Currency

250 E Street, S.W.

Mail Stop 2–3

Washington, DC 20219

Mr. Robert E. Feldman

Executive Secretary

Attention: Comments

Federal Deposit Insurance Corporation

550 17th Street, N.W.

Washington, DC 20429

Mr. Alfred M. Pollard

General Counsel

Attention: Comments

Federal Housing Finance Agency

Fourth Floor, 1700 G Street, N.W.

Washington, DC 20552

Mr. Gary K. Van Meter

Director

Office of Regulatory Policy

Farm Credit Administration

1501 Farm Credit Drive

McLean, VA 22102–5090

Re: Treatment of Inter-Affiliate Transactions under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act

The ABA Securities Association, American Council of Life Insurers, Financial Services Roundtable, Futures Industry Association, Institute of International Bankers, International Swaps and Derivatives Association and Securities Industry and Financial Markets Association, (collectively, the 2 “Associations”)1 appreciate the opportunity to comment on the regulation of

inter-affiliate swaps2 under Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act3 and the rules proposed thereunder by the Commodity Futures Trading Commission (the “CFTC”), the Securities and Exchange Commission (the “SEC”, and together with the CFTC, the “Commissions”), the Board of Governors of the Federal Reserve (the “Board”), the Farm Credit Administration (the “FCA”), the Federal Deposit Insurance Corporation (the “FDIC”), the Federal Housing Finance Agency (the “FHFA”) and the Office of

the Comptroller of the Currency (the “OCC” and, together with the Board, the FCA, the FDIC and the FHFA, the “Prudential Regulators”).4

We are writing because virtually none of the proposed rules governing swaps regulation address how they will apply to inter-affiliate transactions. Silence about the treatment of inter-affiliate transactions could imply that all of the rules apply to them equally. Such application could have the counterproductive effect of lessening market transparency, increasing risk within

individual institutions, increasing costs generally and increasing overall market risk. The purpose of the letter is to provide context about how inter-affiliate swaps are used by financial institutions and customers and to suggest a workable framework for the treatment inter-affiliate trades.

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