The FDIC has issued a final rule that imposes requirements on insured depository institutions (IDIs) supervised by the FDIC that engage in certain retail foreign currency transactions with retail customers. The rule was issued pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, and took effect on July 15, 2011.
The final rule applies to foreign currency futures, options on futures, and options as these terms are used in the Commodity Exchange Act. The rule would also apply to transactions that are “functionally or economically similar” to futures and options, such as “rolling spot” trades. Under the rule:
NOTE: Statement of Applicability to Institutions with Total Assets under $1 Billion: The FDIC believes no FDIC supervised banks in this size category are affected by the final rule. The rule does not cover traditional spot and forward contracts; therefore, only institutions planning to engage in foreign currency futures, options, or rolling spot contracts would be affected.
The Office of the Comptroller of the Currency (OCC) has also recently adopted a final rule authorizing national banks, federal branches and agencies of foreign banks, and their operating subsidiaries to engage in off-exchange transactions in foreign currency with retail customers. The OCC’s and the FDIC’s rules are substantially similar.
Since the supervisory guidance has varying degrees of applicability to financial institutions, it is not recreated here in its entirety, but may be accessed at http://www.fdic.gov/news/news/financial/2011/fil11055a.pdf.