Utility special entities.
(B) Utility special entities.
(1) Solely for purposes of determining whether a person's swap dealing activity has exceeded the $25 million aggregate gross notional amount threshold set forth in paragraph (4)(i)(A) of this definition for swaps in which the counterparty is a special entity, a person may exclude utility operations-related swaps in which the counterparty is a utility special entity.
(2) For purposes of this paragraph (4)(i)(B), a utility special entity is a special entity, as that term is defined in section 4s(h)(2)(C) of the Act, 7 U.S.C. 6s(h)(2)(C), and 23.401(c) of this chapter, that:
(i) Owns or operates electric or natural gas facilities, electric or natural gas operations or anticipated electric or natural gas facilities or operations;
(ii) Supplies natural gas or electric energy to other utility special entities;
(iii) Has public service obligations or anticipated public service obligations under Federal, State or local law or regulation to deliver electric energy or natural gas service to utility customers; or
(iv) Is a Federal power marketing agency as defined in section 3 of the Federal Power Act, 16 U.S.C. 796(19).
(3) For purposes of this paragraph (4)(i)(B), a utility operations-related swap is a swap that meets the following conditions:
(i) A party to the swap is a utility special entity;
(ii) A utility special entity is using the swap to hedge or mitigate commercial risk as defined in § 50.50(c) of this chapter;
(iii) The swap is related to an exempt commodity, as that term is defined in section 1a(20) of the Act, 7 U.S.C. 1a(20), or to an agricultural commodity insofar as such agricultural commodity is used for fuel for generation of electricity or is otherwise used in the normal operations of the utility special entity; and
(iv) The swap is an electric energy or natural gas swap, or the swap is associated with: The generation, production, purchase or sale of natural gas or electric energy, the supply of natural gas or electric energy to a utility special entity, or the delivery of natural gas or electric energy service to customers of a utility special entity; fuel supply for the facilities or operations of a utility special entity; compliance with an electric system reliability obligation; or compliance with an energy, energy efficiency, conservation, or renewable energy or environmental statute, regulation, or government order applicable to a utility special entity.
(4) A person seeking to rely on the exclusion in paragraph (4)(i)(B)(1) of this definition may rely on the written representations of the utility special entity that it is a utility special entity and that the swap is a utility operations-related swap, as such terms are defined in paragraphs (4)(i)(B)(2) and (3) of this definition, respectively, unless it has information that would cause a reasonable person to question the accuracy of the representation. The person must keep such representation in accordance with § 1.31.
(C) Insured depository institution swaps in connection with originating loans to customers. Solely for purposes of determining whether an insured depository institution has exceeded the $8 billion aggregate gross notional amount threshold set forth in paragraph (4)(i)(A) of this definition, an insured depository institution may exclude swaps entered into by the insured depository institution with a customer in connection with originating a loan to that customer, subject to the requirements of paragraphs (4)(i)(C)(1) through (6) of this definition.
(1) Timing of execution of swap. The insured depository institution enters into the swap with the customer no earlier than 90 days before execution of the applicable loan agreement, or no earlier than 90 days before transfer of principal to the customer by the insured depository institution pursuant to the loan, unless an executed commitment or forward agreement for the applicable loan exists, in which event the 90 day restriction does not apply;
(2) Relationship of swap to loan.
(i) The rate, asset, liability or other term underlying such swap is, or is related to, a financial term of such loan, which includes, without limitation, the loan's duration, rate of interest, the currency or currencies in which it is made and its principal amount; or
(ii) Such swap is permissible under the insured depository institution's loan underwriting criteria and is commercially appropriate in order to hedge risks incidental to the borrower's business (other than for risks associated with an excluded commodity) that may affect the borrower's ability to repay the loan;
(3) Duration of swap. The duration of the swap does not extend beyond termination of the loan;
(4) Level of funding of loan.
(i) The insured depository institution is committed to be, under the terms of the agreements related to the loan, the source of at least five percent of the maximum principal amount under the loan; or
(ii) If the insured depository institution is committed to be, under the terms of the agreements related to the loan, the source of less than five percent of the maximum principal amount under the loan, then the aggregate notional amount of all swaps entered by the insured depository institution with the customer in connection with the financial terms of the loan cannot exceed the principal amount of the insured depository institution's loan;
(5) The swap is considered to have been entered into in connection with originating a loan with a customer if the insured depository institution:
(i) Directly transfers the loan amount to the customer;
(ii) Is a part of a syndicate of lenders that is the source of the loan amount that is transferred to the customer;
(iii) Purchases or receives a participation in the loan; or
(iv) Under the terms of the agreements related to the loan, is, or is intended to be, the source of funds for the loan; and
(6) The loan to which the swap relates shall not include:
(i) Any transaction that is a sham, whether or not intended to qualify for the exception from the de minimis threshold in this definition; or
(ii) Any synthetic loan.
17 CFR § 1.3
Words used in the singular form in the rules and regulations in this chapter shall be deemed to import the plural and vice versa, as the context may require. The following terms, as used in the Commodity Exchange Act, or in the rules and regulations in this chapter, shall have the meanings hereby assigned to them, unless the context otherwise requires: