BNY Mellon, SunTrust Given 2-Year Phase-Out for Some SwapsJesse Hamilton
Bank of New York Mellon Corp. and SunTrust Banks Inc. will have an extra two years to separate derivatives trading from units that get federal backing.
The Federal Reserve, in letters to the banks posted on its website today, said the companies must determine whether to halt the swaps activity or move it to properly capitalized affiliates. Under the Dodd-Frank Act rule requiring the swaps push-out, interest-rate and some credit swaps can still be traded inside the banks.
“A significantly shorter or no transition period could result in disorderly termination or divestiture of swaps activities and considerable disruption to swaps markets and financial markets,” Robert Frierson, secretary of the Fed board of governors, wrote in the letters, dated yesterday.
Dodd-Frank overhauled swaps trading in an effort to make the industry less vulnerable to a crisis such as the one that struck in 2008. The law requires equity, some commodity and non-cleared credit derivatives be pushed out of bank units with access to deposit insurance and the Fed’s discount window.
Goldman Sachs Group Inc. was granted the same two-year transition a week ago, and the Office of the Comptroller of the Currency gave the same phase-out period last month to major banks it oversees, including JPMorgan Chase & Co., Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Morgan Stanley.
Kevin Heine, a BNY Mellon spokesman, and Sue Mallino, a SunTrust spokeswoman, declined to comment on the Fed’s decision.