To require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for cleared derivatives.

To require the appropriate Federal banking agencies to recognize the exposure-reducing nature of client margin for cleared derivatives. 1. Treatment of client margin (a) Treatment of client margin for insured depository institutions Section 18(n) of the Federal Deposit Insurance Act ( 12 U.S.C. 1828(n) (1) by striking No appropriate (1) Unidentified intangible assets No appropriate ; and (2) by adding at the end the following: (2) Treatment of client margin For purposes of any leverage-based capital rule, guideline, standard, or requirement promulgated, prescribed, or imposed by any appropriate Federal banking agency on insured depository institutions, the amount of any initial margin provided by a client of an insured depository institution with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the insured depository institution’s guarantee of the client’s derivative obligation to the central counterparty. . (b) Treatment of client margin for bank holding companies Section 5(c)(3) of the Bank Holding Company Act of 1956 ( 12 U.S.C. 1844(c)(3) (1) by adding at the end the following: (D) Treatment of client margin For purposes of any leverage-based capital rule, guideline, standard, or requirement promulgated, prescribed, or imposed by the Board on bank holding companies, the amount of any initial margin provided by a client of a bank holding company or affiliate thereof with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the guarantee by the bank holding company or affiliate thereof of the client’s derivative obligation to the central counterparty. . (c) Treatment of client margin for savings and loan holding companies Section 10(g)(1) of the Home Owners’ Loan Act ( 12 U.S.C. 1467a(g)(1) (1) by striking The Board (A) Regulations and orders The Board ; and (2) by adding at the end the following: (B) Treatment of client margin For purposes of any leverage-based capital rule, guideline, standard, or requirement promulgated, prescribed, or imposed by the Board on savings and loan holding companies, the amount of any initial margin provided by a client of a savings and loan holding company or affiliate thereof with respect to a centrally-cleared derivative obligation shall be deducted from the amount of any leverage exposure arising from the guarantee by the savings and loan holding company or affiliate thereof of the client’s derivative obligation to the central counterparty. . (d) Amendments to leverage-Based capital regulations Not later than the end of the 3-month period beginning on the date of the enactment of this Act, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Comptroller of the Currency shall amend their rules to implement the amendments made by this Act. August 3, 2018 Committed to the Committee of the Whole House on the State of the Union and ordered to be printed

Summary: This bill amends the Federal Deposit Insurance Act, the Bank Holding Company Act of 1956, and the Home Owners' Loan Act to exclude initial client margin funds (i.e., funds lent to a client by a broker to facilitate a derivatives contract) from leverage-exposure calculations for purposes of determining whether an insured depository institution, a bank holding company, or a savings and loan holding company is in compliance with federal leverage-based capital standards.