##c derivatives ’ risk - based capital and leverage requirements and by requiring banking firms to hold an additional buffer of highquality, liquid assets to address potential liquidity needs resulting from their derivatives portfolios. our proposal for margin imposes initial and variation margin requirements on the noncleared swaps held by swap dealers or major swap participants that have a prudential regulator. for swaps with a nonfinancial end - user counterparty, the proposed rule would not specify a minimum margin requirement. rather, it would allow a banking organization that is a dealer or major participant to establish a threshold, based on a credit exposure limit that is approved and monitored as part of the credit approval process, below which the end user would not have to post margin. for swaps with other counterparties, the proposal would cap the allowable threshold for unsecured credit exposure on noncleared swaps. in addition, the proposal would only apply a margin requirement to contracts entered into after the new requirement becomes effective. a much discussed part of the act is the requirement that banks push portions of their swap activity into affiliates or face restrictions on their access to the discount window or deposit insurance. under the push - out provisions, banking organizations with deposit insurance or access to the federal reserve ’ s discount window will have to reorganize some of their derivatives activity, pushing certain types of swaps out of subsidiary banks and into distinct legal entities that will require their own capitalization and separate documentation of trades with existing customers. the act permits domestic banks to continue to engage in derivatives activities that have been a traditional focus of banks, including hedging activities and dealing in interest rate swaps, currency swaps, certain cleared credit default swaps, and other swaps that reference assets that banks are eligible to hold. however, because of the specific language contained in the act, this exemption for traditional bank derivatives activities does not apply to u. s. branches of foreign banking firms that by law have access to the federal reserve ’ s discount window. a possibly unintended effect of the act ’ s push - out provision may be to require some foreign firms to reorganize their existing u. s. derivatives activities to a greater extent than u. s. firms. proposed rules to implement this section are still under development by the banking agencies. conclusion as the implementation process for the act continues, the challenge facing the board is to enhance supervision, oversight, and prudential standards of major derivatives

##tories. public consultation on these revised international standards is currently under way. the goal of all of these efforts is to develop a consistent international approach to the regulation and supervision of derivatives products and market infrastructures as well as to the sound implementation of the agreed - upon approaches. our aim is to promote both financial stability and fair competitive conditions to the fullest extent possible. infrastructure issues the dodd - frank act addressed both the infrastructure of the derivatives markets and the regulation and supervision of its dealers and major participants. central counterparties are given an expanded role in the clearing and settling of swap and security - based swap bis central bankers ’ speeches ( hereafter referred to as “ swap ” ) transactions, and the board believes benefits can flow from this reform. since 2005, federal reserve staff members have worked with market participants to strengthen the infrastructure for otc derivatives, including developing and broadening the use of central clearing mechanisms and trade repositories. market participants have already established central counterparties that provide clearing services for some otc interest rate, energy, and credit derivatives contracts. if properly designed, managed, and overseen, central counterparties offer an important tool for managing counterparty credit risk, and thus they can reduce risk to market participants and to the financial system. both central counterparties and trade repositories also support regulatory oversight and policymaking by providing more - comprehensive data on the derivatives markets. the board is committed to continuing to work with other authorities, both in the united states and abroad, to ensure that a largely consistent international approach is taken to central counterparties and trade repositories and that their risk - reducing benefits are realized. title viii of the act complements the role of central clearing in title vii through heightened supervisory oversight of systemically important financial market utilities, including systemically important facilities that clear swaps. this heightened oversight is important because financial market utilities such as central counterparties concentrate risk and thus have the potential to transmit shocks throughout the financial markets. the financial stability oversight council is responsible for designating utilities as systemically important. through its role on the council, the board helped develop the designation process that was released for comment in march. separately, the board is also seeking comment on proposed riskmanagement standards that would apply to those designated utilities supervised by the board under title viii. 1 as part of title viii, the board was given new authority to provide designated utilities with access to reserve bank accounts, payment services, and emergency collateralized liquidity in unusual and