On January 3, 2013, the Office of the Comptroller of the Currency (OCC) issued guidance on how an insured federal depository institution (IDI) may request an additional transition period to implement section 716 of the Dodd-Frank Act, known as the swaps Pushout Rule (or sometimes, the Lincoln Rule), which is set to become effective on July 16, 2013. Upon request by the banking entity, the applicable banking regulator may initially grant a transition period of up to 24 months, beginning on July 16, 2013, with a possible extension of one additional year (maximum potential transition periods expire on July 16, 2016). During the transition period, IDIs will be allowed to engage in non-exempt swaps trading activity. Requests for a transition period must be submitted by January 31, 2013.

The Pushout Rule prohibits entities from receiving federal assistance, including FDIC insurance and access to the Federal Reserve's discount window, while engaging in non-exempt swaps trading activity. For more information on the Swaps Pushout Rule and exempt swaps trading activity, see Practice Note, US Derivatives Regulation: Swaps Pushout Rule.

Upon request by the IDI, the applicable banking agency may initially grant a transition period of up to 24 months, with a possible extension of one additional year. The transition period will run from the effective date of the Pushout Rule, July 16, 2013, and the maximum potential transition period will conclude on July 16, 2016.

To be eligible for the transition period, the IDI must submit a written request for a transition period by January 31, 2013, which must include:

In determining the appropriate transition period, the applicable federal banking agency must provide written findings on the potential impact of prohibiting non-exempt swaps activity on the entity's following activities:

The OCC will consider requests for a transition period favorably for entities that provide the requisite information.

While this transition period provides relief for federally insured US banks, it does not aid uninsured community banks and US branches of foreign banks that have access to the Federal Reserve's discount window. Under the current guidance, such entities must comply with the Swaps Pushout Rule by July 16, 2013, pending further legislative or regulatory action.

For more information on the Swaps Pushout Rule, see Practice Note, US Derivatives Regulation: Swaps Pushout Rule.

Note that the Swaps Pushout Rule has been amended by federal legislation signed into law by President Obama in December 2014 and will now affect only a limited range of transactions (see Legal Update, Dodd-Frank Swaps Pushout Rule Substantially Repealed).