Editorial Note on Part 45
Editorial Note: Nomenclature changes to part 45 appear at 80 FR 74898, 74910, Nov. 30, 2015.

§ 45.9 Cross-border application of margin requirements. ( a ) *Transactions to which this rule does not apply.* The requirements of §§ 45.3 through 45.8 and §§ 45.10 through 45.12 shall not apply to any foreign non-cleared swap or foreign non-cleared security-based swap of a foreign covered swap entity.
( b ) For purposes of this section, a *foreign non-cleared swap* or *foreign non-cleared security-based swap* is any non-cleared swap or non-cleared security-based swap with respect to which neither the counterparty to the foreign covered swap entity nor any party that provides a guarantee of either party's obligations under the non-cleared swap or non-cleared security-based swap is: ( 1 ) An entity organized under the laws of the United States or any State (including a U.S. branch, agency, or subsidiary of a foreign bank) or a natural person who is a resident of the United States;
( 2 ) A branch or office of an entity organized under the laws of the United States or any State; or
( 3 ) A swap entity that is a subsidiary of an entity that is organized under the laws of the United States or any State.
( c ) For purposes of this section, a *foreign covered swap entity* is any covered swap entity that is not: ( 1 ) An entity organized under the laws of the United States or any State, including a U.S. branch, agency, or subsidiary of a foreign bank;
( 2 ) A branch or office of an entity organized under the laws of the United States or any State; or
( 3 ) An entity that is a subsidiary of an entity that is organized under the laws of the United States or any State.
( d ) *Transactions for which substituted compliance determination may apply* — ( 1 ) *Determinations and reliance.* For non-cleared swaps and non-cleared security-based swaps entered into by covered swap entities described in paragraph (d)(3) of this section, a covered swap entity may satisfy the provisions of this part by complying with the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps that the prudential regulators jointly, conditionally or unconditionally, determine by public order satisfy the corresponding requirements of §§ 45.3 through 45.8 and §§ 45.10 through 45.12.
( 2 ) *Standard.* In determining whether to make a determination under paragraph (d)(1) of this section, the prudential regulators will consider whether the requirements of such foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps applicable to such covered swap entities are comparable to the otherwise applicable requirements of this part and appropriate for the safe and sound operation of the covered swap entity, taking into account the risks associated with non-cleared swaps and non-cleared security-based swaps.
( 3 ) *Covered swap entities eligible for substituted compliance.* A covered swap entity may rely on a determination under paragraph (d)(1) of this section only if: ( i ) The covered swap entity's obligations under the non-cleared swap or non-cleared security-based swap do not have a guarantee from: ( A ) An entity organized under the laws of the United States or any State (other than a U.S. branch or agency of a foreign bank) or a natural person who is a resident of the United States; or
( B ) A branch or office of an entity organized under the laws of the United States or any State; and
( ii ) The covered swap entity is: ( A ) A foreign covered swap entity;
( B ) A U.S. branch or agency of a foreign bank; or
( C ) An entity that is not organized under the laws of the United States or any State and is a subsidiary of a depository institution, Edge corporation, or agreement corporation.
( 4 ) *Compliance with foreign margin collection requirement.* A covered swap entity satisfies its requirement to post initial margin under § 45.3(b) by posting to its counterparty initial margin in the form and amount, and at such times, that its counterparty is required to collect pursuant to a foreign regulatory framework, provided that the counterparty is subject to the foreign regulatory framework and the prudential regulators have made a determination under paragraph (d)(1) of this section, unless otherwise stated in that determination, and the counterparty's obligations under the non-cleared swap or non-cleared security-based swap do not have a guarantee from: ( i ) An entity organized under the laws of the United States or any State (including a U.S. branch, agency, or subsidiary of a foreign bank) or a natural person who is a resident of the United States; or
( ii ) A branch or office of an entity organized under the laws of the United States or any State.
( e ) *Requests for determinations.* ( 1 ) A covered swap entity described in paragraph (d)(3) of this section may request that the prudential regulators make a determination pursuant to this section. A request for a determination must include a description of: ( i ) The scope and objectives of the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps;
( ii ) The specific provisions of the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps that govern: ( A ) The scope of transactions covered;
( B ) The determination of the amount of initial margin and variation margin required and how that amount is calculated;
( C ) The timing of margin requirements;
( D ) Any documentation requirements;
( E ) The forms of eligible collateral;
( F ) Any segregation and rehypothecation requirements; and
( G ) The approval process and standards for models used in calculating initial margin and variation margin;
( iii ) The supervisory compliance program and enforcement authority exercised by a foreign financial regulatory authority or authorities in such system to support its oversight of the application of the non-cleared swap or non-cleared security-based swap regulatory framework and how that framework applies to the non-cleared swaps or non-cleared security-based swaps of the covered swap entity; and
( iv ) Any other descriptions and documentation that the prudential regulators determine are appropriate.
( 2 ) A covered swap entity described in paragraph (d)(3) of this section may make a request under this section only if the non-cleared swap or non-cleared security-based swap activities of the covered swap entity are directly supervised by the authorities administering the foreign regulatory framework for non-cleared swaps and non-cleared security-based swaps.
( f ) *Segregation unavailable.* Sections 45.3(b) and 45.7 do not apply to a non-cleared swap or non-cleared security-based swap entered into by: ( 1 ) A foreign branch of a covered swap entity that is a depository institution; or
( 2 ) A covered swap entity that is not organized under the laws of the United States or any State and is a subsidiary of a depository institution, Edge corporation, or agreement corporation, if: ( i ) Inherent limitations in the legal or operational infrastructure in the foreign jurisdiction make it impracticable for the covered swap entity and the counterparty to post any form of eligible initial margin collateral recognized pursuant to § 45.6(b) in compliance with the segregation requirements of § 45.7;
( ii ) The covered swap entity is subject to foreign regulatory restrictions that require the covered swap entity to transact in the non-cleared swap or non-cleared security-based swap with the counterparty through an establishment within the foreign jurisdiction and do not accommodate the posting of collateral for the non-cleared swap or non-cleared security-based swap outside the jurisdiction;
( iii ) The counterparty to the non-cleared swap or non-cleared security-based swap is not, and the counterparty's obligations under the non-cleared swap or non-cleared security-based swap do not have a guarantee from: ( A ) An entity organized under the laws of the United States or any State (including a U.S. branch, agency, or subsidiary of a foreign bank) or a natural person who is a resident of the United States; or
( B ) A branch or office of an entity organized under the laws of the United States or any State;
( iv ) The covered swap entity collects initial margin for the non-cleared swap or non-cleared security-based swap in accordance with § 45.3(a) in the form of cash pursuant to § 45.6(b)(1), and posts and collects variation margin in accordance with § 45.4(a) in the form of cash pursuant to § 45.6(b)(1); and
( v ) The OCC provides the covered swap entity with prior written approval for the covered swap entity's reliance on this paragraph (f) for the foreign jurisdiction.
( g ) *Guarantee* means an arrangement pursuant to which one party to a non-cleared swap or non-cleared security-based swap has rights of recourse against a third-party guarantor, with respect to its counterparty's obligations under the non-cleared swap or non-cleared security-based swap. For these purposes, a party to a non-cleared swap or non-cleared security-based swap has rights of recourse against a guarantor if the party has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from the guarantor with respect to its counterparty's obligations under the non-cleared swap or non-cleared security-based swap. In addition, any arrangement pursuant to which the guarantor has a conditional or unconditional legally enforceable right to receive or otherwise collect, in whole or in part, payments from any other third party guarantor with respect to the counterparty's obligations under the non-cleared swap or non-cleared security-based swap, such arrangement will be deemed a guarantee of the counterparty's obligations under the non-cleared swap or non-cleared security-based swap by the other guarantor.
( h ) ( 1 ) A covered swap entity described in paragraphs (d)(3)(i) and (ii) of this section is not subject to the requirements of § 45.3(a) or § 45.11(a) for any non-cleared swap or non-cleared security-based swap executed with an affiliate of the covered swap entity; and
( 2 ) For purposes of paragraph (h)(1) of this section, “affiliate” has the same meaning provided in § 45.11(d).
[80 FR 74898, Nov. 30, 2015, as amended at 85 FR 39772, July 1, 2020]