JPMorgan Chase & Co., Goldman Sachs Group Inc. and Bank ofAmerica Corp. won a delay of Dodd-Frank Act requirements that theywall off some derivatives trades from bank units backed by federaldeposit insurance.

Commercial banks including the Wall Street firms may get as longas an additional two years — until July 2015 — to comply with therules, the Office of the Comptroller of the Currency said in anotice yesterday. The provision was included in Dodd-Frank, the2010 financial-regulation law, as a way to limit taxpayer supportfor risky derivatives trades.

The Commodity Futures Trading Commission and other regulatorsneed to complete swap rules to allow “federal depositoryinstitutions to make well-informed determinations concerningbusiness restructurings that may be necessary,” the OCC said in thenotice. The so-called push-out provision of Dodd-Frank requiresthat equity, some commodity and non-cleared credit derivatives bemoved — or pushed out — into separate affiliates without federalassistance.

In February, the U.S. House Financial Services Committeeapproved with bipartisan support legislation that would let bankskeep commodity and equity derivatives in federally insured units byremoving part of the push-out rule. Regulators including FederalReserve Chairman Ben S. Bernanke had opposed the provision when itwas included in Dodd-Frank, saying it would drive derivatives toless-regulated entities.

The OCC is prepared to “consider favorably” requests fortransition, the regulator said in the six-page notice. The agencysaid delays could be extended for a third year based onconsultations with other regulators.

JPMorgan had 99 percent of its $72 trillion in notional swapstrades in its commercial bank in the third quarter of 2012,according to the OCC's quarterly derivatives report. Bank ofAmerica had 68 percent of its $64 trillion in its commercial bank,according to the report.

Banks including Citigroup Inc. will be given as long as twoyears beyond the July 16 deadline to move their swaps businesses,the OCC said. They must submit written requests describing how atransition period would reduce harmful effects on mortgage lending,job creation and capital formation. The requests, which must besubmitted by Jan. 31, also must weigh how the transition periodwould affect insured depositors.

“The procrastination of both regulators and the banks on thisportion of Dodd-Frank has been pretty amazing,” Marcus Stanley,policy director for Americans for Financial Reform, a coalitionincluding the AFL-CIO labor federation, said in a telephoneinterview. “The swaps-pushout provision is a really important partand something that absolutely should be a central part of theregulatory framework.”

Scaled Back

Blanche Lincoln, an Arkansas Democrat who led the SenateAgriculture Committee during talks leading the regulatory overhaul,sponsored the original provision in 2010. It applied to more moretypes of derivatives before it was scaled back amid objections fromBernanke and Sheila Bair, former Federal Deposit Insurance Corp.chairman.

“I never myself thought it made a great deal of sense,” BarneyFrank, the Massachusetts Democrat who helped draft the Dodd-Franklaw and whose last day in Congress was yesterday, said on Feb. 16when he supported changes to the pushout provision.

Ken Bentsen, executive vice president of public policy andadvocacy at the Securities Industry and Financial MarketsAssociation, said Congress should still seek to change theprovision.

“We continue to believe that the underlying swaps push outprovision is bad policy,” Bentsen said yesterday in an e-mail. Theadditional time is important because regulators haven't proposedhow the provision would work. “Given this uncertainty, it isimpractical to require compliance by July 2013,” he said.

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