956.6—Use of hedging instruments.
(a) Applicability of GAAP.
Derivative instruments that do not qualify as hedging instruments pursuant to GAAP may be used only if a non-speculative use is documented by the Bank.
(b) Documentation requirements.
(1)
Transactions with a single counterparty shall be governed by a single master agreement when practicable.
(2)
A Bank's agreement with the counterparty for over-the-counter derivative contracts shall include:
(i)
A requirement that market value determinations and subsequent adjustments of collateral be made at least on a monthly basis;
(ii)
A statement that failure of a counterparty to meet a collateral call will result in an early termination event;
(iii)
A description of early termination pricing and methodology, with the methodology reflecting a reasonable estimate of the market value of the over-the-counter derivative contract at termination (standard International Swaps and Derivatives Association, Inc. language relative to early termination pricing and methodology may be used to satisfy this requirement); and
(iv)
A requirement that the Bank's consent be obtained prior to the transfer of an agreement or contract by a counterparty.