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CERTAINTY FOR BANK PRODUCTS ACT OF 2000

IV–REGULATORY RESPONSIBILITY FOR BANK PRODUCTS 1

17 U.S.C. 1 note) SHORT TITLE. title may be cited as the "Legal Certainty for Bank Prodof 2000”. [7 U.S.C. 27) DEFINITIONS. BANK.-In this title, the term "bank” means (1) any depository institution (as defined in section 3(c) of Federal Deposit Insurance Act); (2) any foreign bank or branch or agency of a foreign bank ch as defined in section 1(b) of the International Banking i of 1978);

(3) any Federal or State credit union (as defined in section I of the Federal Credit Union Act);

(4) any corporation organized under section 25A of the leral Reserve Act;

(5) any corporation operating under section 25 of the Fed1 Reserve Act; (6) any trust company; or (7) any subsidiary of any entity described in paragraph (1) ough (6) of this subsection, if the subsidiary is regulated as he subsidiary were part of the entity and is not a broker or der (as such terms are defined in section 3 of the Securities change Act of 1934) or a futures commission merchant (as ined in section la(20) of the Commodity Exchange Act).

IDENTIFIED BANKING PRODUCT.—In this title, the term ied banking product" shall have the same meaning as iphs (1) through (5) of section 206(a) of the Gramm-LeachIct, except that in applying such section for purposes of this

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[7 U.S.C. 1 note) SHORT TITLE. s title may be cited as the "Legal Certainty for Bank Prodt of 2000”. lo (7 U.S.C. 27) DEFINITIONS. BANK.—In this title, the term "bank” means

(1) any depository institution (as defined in section 3(c) of Federal Deposit Insurance Act); (2) any foreign bank or branch or agency of a foreign bank ch as defined in section 1(b) of the International Banking of 1978); (3) any Federal or State credit union (as defined in section of the Federal Credit Union Act);

(4) any corporation organized under section 25A of the leral Reserve Act;

(5) any corporation operating under section 25 of the Fed1 Reserve Act; (6) any trust company; or (7) any subsidiary of any entity described in paragraph (1) ough (6) of this subsection, if the subsidiary is regulated as he subsidiary were part of the entity and is not a broker or der (as such terms are defined in section 3 of the Securities change Act of 1934) or a futures commission merchant (as ined in section 1a(20) of the Commodity Exchange Act).

IDENTIFIED BANKING PRODUCT.-In this title, the term ied banking product" shall have the same meaning as in iphs (1) through (5) of section 206(a) of the Gramm-LeachAct, except that in applying such section for purposes of this

(1) the term "bank” shall have the meaning given in subtion (a) of this section; and

(2) the term “qualified investor” means eligible contract rticipant (as defined in section la(12) of the Commodity Exinge Act, as in effect on the date of the enactment of the mmodity Futures Modernization Act of 2000). HYBRID INSTRUMENT.In this title, the term "hybrid instrumeans an identified banking product not excluded by section this Act, offered by a bank, having one or more payments indexed to the value, level, or rate of, or providing for the delivery of, one or more commodities (as defined in section la(4) of the Commodity Exchange Act).

tle, as contained in Appendix E (H.R. 5660; 114 Stat. 2763A-365) of Public Law 106– led the Commodity Futures Modernization Act of 2000), was enacted into law by the made in section 1(aX6) of such public law (114 Stat. 2763). 21

(d) COVERED SWAP AGREEMENT.- In this title, the term "covered swap agreement” means a swap agreement (as defined in section 206(b) of the Gramm-Leach-Bliley Act), including a credit or equity swap, based on a commodity other than an agricultural commodity enumerated in section la(4) of the Commodity Exchange Act if

(1) the swap agreement

(A) is entered into only between persons that are eligible contract participants (as defined in section la(12) of the Commodity Exchange Act, as in effect on the date of the enactment of the Commodity Futures Modernization Act of 2000) at the time the persons enter into the swap agreement; and

(B) is not entered into or executed on a trading facility (as defined in section la(33) of the Commodity Exchange Act); or (2) the swap agreement

(A) is entered into or executed on an electronic trading facility (as defined in section la(10) of the Commodity Exchange Act);

(B) is entered into on a principal-to-principal basis between parties trading for their own accounts or as described in section la(12XBXii) of the Commodity Exchange Act;

(C) is entered into only between persons that are eligible contract participants as described in subparagraph (A), (B)(ii), or (C) of section la(12) of the Commodity Exchange Act, as in effect on the date of the enactment of the Commodity Futures Modernization Act of 2000, at the time the persons enter into the swap agreement; and

(D) is an agreement, contract or transaction in an excluded commodity (as defined in section la(13) of the Com

modity Exchange Act). SEC. 403. [7 U.S.C. 27a) EXCLUSION OF IDENTIFIED BANKING PROD

UCTS COMMONLY OFFERED ON OR BEFORE DECEMBER 5,

2000. No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, an identified banking product if

(1) an appropriate banking agency certifies that the product has been commonly offered, entered into, or provided in the United States by any bank on or before December 5, 2000, under applicable banking law; and

(2) the product was not prohibited by the Commodity Exchange Act and not regulated by the Commodity Futures Trading Commission as a contract of sale of a commodity for future delivery (or an option on such a contract) or an option on a commodity, on or before December 5, 2000.

SEC. 404. [7 U.S.C. 27b) EXCLUSION OF CERTAIN IDENTIFIED BANKING

PRODUCTS OFFERED BY BANKS AFTER DECEMBER 5, 2000. No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, an identified banking product which had not been commonly offered, entered into, or provided in the United States by any bank on or before December 5, 2000, under applicable banking law if

(1) the product has no payment indexed to the value, level, or rate of, and does not provide for the delivery of, any commodity (as defined in section la(4) of the Commodity Exchange Act); or

(2) the product or commodity is otherwise excluded from the Commodity Exchange Act. SEC. 405. [7 U.S.C. 27c) EXCLUSION OF CERTAIN OTHER IDENTIFIED

BANKING PRODUCTS. (a) IN GENERAL.-No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not exercise regulatory authority with respect to, a banking product if the product is a hybrid instrument that is predominantly à banking product under the predominance test set forth in subsection (b).

(b) PREDOMINANCE TEST.-A hybrid instrument shall be considered to be predominantly a banking product for purposes of this section if

(1) the issuer of the hybrid instrument receives payment in full of the purchase price of the hybrid instrument substantially contemporaneously with delivery of the hybrid instrument;

(2) the purchaser or holder of the hybrid instrument is not required to make under the terms of the instrument, or any arrangement referred to in the instrument, any payment to the issuer in addition to the purchase price referred to in paragraph (1), whether as margin, settlement payment, or otherwise during the life of the hybrid instrument or at maturity;

(3) the issuer of the hybrid instrument is not subject by the terms of the instrument to mark-to-market margining requirements; and

(4) the hybrid instrument is not marketed as a contract of sale of a commodity for future delivery (or option on such a contract) subject to the Commodity Exchange Act.

(c) MARK-TO-MARKET MARGINING REQUIREMENT.-For purposes of subsection (b)(3), mark-to-market margining requirements shall not include the obligation of an issuer of a secured debt instrument to increase the amount of collateral held in pledge for the benefit of the purchaser of the secured debt instrument to secure the repayment obligations of the issuer under the secured debt instrument. SEC. 406. [7 U.S.C. 27d) ADMINISTRATION OF THE PREDOMINANCE

TEST. (a) IN GENERAL.—No provision of the Commodity Exchange Act shall apply to, and the Commodity Futures Trading Commission shall not regulate, a hybrid instrument, unless the Commission

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