puts, another commenter argued that a guarantee should be defined to constitute an express, legally enforceable arrangement providing foreign counterparties with recourse to the U.S. guarantor. Another commenter argued that cross-default provisions would not generally give a swap counterparty any direct right of access against the specified entity and should not be treated as a guarantee. In order to provide additional clarity on the meaning of guarantee for purposes of § . 9, the final rule requires one party to have rights of recourse against a third-party guarantor; however, in order to address potential concerns about evasion, the Agencies will deem a guarantee to exist, if the third-party guarantor has a guarantee from one or more additional third- party guarantors, with respect to the obligations under the non-cleared swap. The Agencies believe that a definition of that is narrowly targeted to the particular swap “guarantee” obligation provides clarity through a bright-line test that can be applied consistently and is appropriately limited in scope. For example, if a foreign registered German Bank covered swap entity enters into a swap with a non-covered swap entity, foreign subsidiary of a (“Party W”) U.S. covered swap entity and Party X has a guarantee from a third-party guarantor (“Party X”), that is a foreign affiliate of Party X who then, in turn has a guarantee from its U.S. (“Party Y”), covered swap entity parent entity the Agencies would deem a guarantee to exist (“Parent Z”), between Party X and Parent Z, on Party swap obligations. X’s Substituted compliance. In addition to the exclusion for certain swaps described above, the final rule would permit certain covered swap entities to comply with a foreign regulatory framework for swaps if the Agencies jointly determine that such foreign regulatory framework is comparable to the requirements of the rule. The development of the 2013 Agencies’
puts, another commenter argued that a guarantee should be defined to constitute an express, legally enforceable arrangement providing foreign counterparties with recourse to the U.S. guarantor. Another commenter argued that cross-default provisions would not generally give a swap counterparty any direct right of access against the specified entity and should not be treated as a guarantee. In order to provide additional clarity on the meaning of guarantee for purposes of § . 9, the final rule requires one party to have rights of recourse against a third-party guarantor; however, in order to address potential concerns about evasion, the Agencies will deem a guarantee to exist, if the third-party guarantor has a guarantee from one or more additional third- party guarantors, with respect to the obligations under the non-cleared swap. The Agencies believe that a definition of “guarantee” that is narrowly targeted to the particular swap obligation provides clarity through a bright-line test that can be applied consistently and is appropriately limited in scope. For example, if a foreign registered German Bank covered swap entity (“Party W”) enters into a swap with a non-covered swap entity, foreign subsidiary of a U.S. covered swap entity (“Party X”), and Party X has a guarantee from a third-party guarantor that is a foreign affiliate of Party X (“Party Y”), who then, in turn has a guarantee from its U.S. covered swap entity parent entity (“Parent Z”), the Agencies would deem a guarantee to exist between Party X and Parent Z, on Party X’s swap obligations. Substituted compliance. In addition to the exclusion for certain swaps described above, the final rule would permit certain covered swap entities to comply with a foreign regulatory framework for swaps if the Agencies jointly determine that such foreign regulatory framework is comparable to the requirements of the Agencies’ rule. The development of the 2013
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