Proposed Amendment to Volcker Rule
On June 4, 2018, several regulatory agencies (FDIC, Federal Reserve, SEC, OCC, CFTC) collectively proposed changes to the Volcker Rule due to the President having signed the "Economic Growth, Regulatory Relief, and Consumer Protection Act" (the "Act") into law on May 24, 2018. Sections 203 and 204 of the Act amends section 13 of the Bank Holding Company Act ("BHC Act"), commonly known as the Volcker Rule. These provisions of the Act are effective immediately.
The agencies have requested comments on the proposed changes. The Proposal changes are summarized below:
- Tailor the application of the Volcker Rule based on the size and scope of trading activities of a banking entity, rather than total consolidated assets.
- Require banking entities with significant trading activities of greater than $10 billion in total trading assets and liabilities (excluding U.S. government obligations) to adopt the six pillar compliance program under Section 351.20 of the proposed Rule and streamline required metrics submissions.
- Allow banking entities with moderate trading activities between $1 billion and $10 billion in total trading assets and liabilities (excluding U.S. government obligations) to adopt a simplified compliance program.
- Grant a presumption of compliance to banks with limited trading activities, defined as less than $1 billion in total trading assets and liabilities (excluding U.S. government obligations), that eliminates the requirement to implement a compliance program under Section 351.20 of the proposed Rule. Banks with limited trading would have no obligation to demonstrate compliance with the Rule on an ongoing basis.
- Require an IDI that has, or is an affiliate of a banking entity that has, moderate or significant trading activity to submit a CEO attestation.
- Retain the current prohibition on covered funds and the related exclusions and exemptions.
- Retain the 2014 Interim Final Rule on Collateralized Debt Obligations backed by Trust Preferred Securities, which would remain in effect without change.