On Thursday, August 16, Credit Union National Association (CUNA) submitted a comment letter to the Commodity Futures Trading Commission (CFTC) regarding its proposal to provide a clearing exemption for certain swaps entered into by cooperatives. Under the proposed exemption, the CFTC would permit cooperatives with $10 billion or more in assets to elect not to clear swaps in connection with originating loans for members or that hedge or mitigate risks associated with member loans, if the cooperative’s members are either: 1) non-financial entities; 2) financial entities to which the small financial institution exemption applies; or 3) cooperatives themselves.
This proposed exemption would supplement the final rule on the end-user exception to the clearing requirement for swaps, which exempts credit unions and other financial institutions with $10 billion or less in assets. CUNA's comment letter supports the proposed clearing exemption for credit unions and believes that all well managed credit unions, consistent with safety and soundness, should be able to elect not to clear swaps that are for the purpose of hedging interest rate risks. CUNA believes the proposed exemption would help minimize the additional costs and fees associated with mandatory clearing and provide flexibility for credit unions to use non-cleared swaps.