Oregon Oregon State Treasury

Rule Rule 170-060-1010
Terms, Conditions, and Reporting Requirements for an Agreement for Exchange of Interest Rates


(1)

Public bodies shall only enter into agreements for the exchange of interest rates as authorized by, and in compliance with, ORS 287A.335 (Agreements for exchange of interest rates).

(2)

Amount. The notional amount of an agreement that relates to outstanding borrowing may not exceed the outstanding principal amount of the borrowing when the agreement is entered into. The notional amount of an agreement that relates to a borrowing that the public body expects to issue in the future may not exceed the principal amount of the borrowing reasonably anticipated to be outstanding when payments are required to commence under the agreement (as evidenced by a copy of the resolution, minutes of the board or other authorizing directive of the director or board as required by section 3 of this rule).

(3)

Authorization. With respect to an obligation or obligations that a public body has issued or will issue (as evidenced by a copy of the resolution, minutes of the board or other authorizing directive of the director or board), subject to ORS 287A.335 (Agreements for exchange of interest rates) or as the same may be amended in the future, the public body may designate the particular obligation to which an agreement relates after execution of the agreement. Such a designation after execution of the agreement shall be considered an agreement modification, and the public body shall notify the MDAC of such modification in accordance with this rule.

(4)

Swap Policy. The public body shall have adopted a swap policy as part of its ongoing responsibility to manage its debt obligations. In adopting a swap policy, the public body should review and consider the current edition of the Government Finance Officers Association Recommended Practice: “Use of Debt-Related Derivatives Products and the Development of a Derivatives Policy” and the “MDAC Sample Interest Rate Swap Policy”. Included in the swap policy, the public body shall provide a general description of risks related to agreements for exchange of interest rates and the means by which the public body will address those risks. The swap policy shall also provide that an analysis of the risks and benefits of each agreement shall be presented to the governing body prior to executing such agreement.

(5)

MDAC Notice. The public body shall notify the MDAC of the execution of an agreement for the exchange of interest rates by delivering to the OST, as provided in OAR 170-055-0001 (Definitions and Notice to Treasurer)(3), within 30-days of its execution, the following:

(a)

An MDAC Form 3.

(b)

An executed copy of the resolution, minutes of the board or other authorizing directive of the director or board, specifically authorizing the public body to engage and participate in an agreement for the exchange of interest rates. The authorization shall state the reason that the public body is authorizing the agreement, shall include a finding that the agreement is being executed for permitted purposes and complies with the authorizing act and this rule.

(c)

The public body’s swap policy.

(d)

The legal opinion, if any, addressing the validity of the public body’s obligations under the agreement for the exchange of interest rates that is delivered in connection with the agreement.

(6)

Terms. An agreement shall contain terms and conditions consistent with the swap policy adopted by the public body including, but not limited to:

(a)

The notional amount of the agreement;

(b)

Payment terms;

(c)

The term of the agreement;

(d)

Insurance, collateral or other assurances of payment provided in compliance with ORS 287A.335 (Agreements for exchange of interest rates) or as the same may be amended in the future;

(e)

Provisions for termination in advance of the scheduled term;

(f)

Events of default and related remedies;

(g)

Assurances that the counterparty will maintain a minimum rating with respect to its termination payment obligations in one of the top three rating categories without gradation by at least two nationally recognized rating agencies or that the counterparty’s obligations will be collateralized;

(h)

Modifications to standard ISDA swap documentation, as specified in the Schedule as may be required by the public body’s policy or governing law;

(i)

Limitations on allowable collateral and frequency of the valuation of such collateral; and

(j)

Agreement valuation methodology.

(7)

Ratings Reduction. The public body shall notify the MDAC of any material change in the public body’s obligations or benefits under the agreement for the exchange of interest rates that result from a reduction in the ratings of the public body, a counterparty or guarantor.

(8)

Modification or Termination. If after executing an agreement for the exchange of interest rates, the agreement is modified or terminated for any reason prior to its stated end date, the public body shall notify the MDAC within 30-days after completion of the modification and identify the reasons for such termination or modification and the anticipated change in obligation to the public body resulting from the termination or modification.
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Last accessed
Jun. 8, 2021