A proposed rule giving many banks relief from the “Volcker Rule” – created in 2013 to prohibit proprietary trading by banking organizations – will finally be published Tuesday in the Federal Register, and open to comment for 62 days.
Comments are due Sept. 17.
The proposal, released by five federal agencies early last month and 686 pages long (nearly 200 pages longer than the draft form released in June), will be published jointly by the Federal Reserve Board, the Commodity Futures Trading Commission (CFTC), the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC). SEC was among the last to sign on; like the CFTC, the commission was not unanimous in issuing this proposal.
The proposal tailors Volcker Rule requirements for three tiers of firms based on trading activity level. In brief, firms with less than $1 billion of consolidated gross trading assets and liabilities would have a rebuttable presumption of compliance with the rule. This group reportedly represents about 98 percent of total U.S. trading activity by banking entities.
A later proposal will address the Volcker Rule exemption provided by the recently enacted Economic Growth, Regulatory Reform, and Consumer Protection Act (S. 2155). Signed into law May 24, the statute exempts from the Volcker Rule banks having less than $10 billion in consolidated assets and total trading assets and liabilities equaling no more than 5% of consolidated assets; it also revises naming provisions for covered funds.
According to the proposal to be published Tuesday, the five agencies plan to address the statutory changes made by the new law through a separate rulemaking process; no changes are made in the proposed rule that would implement those amendments, according to the proposal’s summary.
“The amendments took effect upon enactment, however, and in the interim between enactment and the adoption of implementing regulations, the Agencies will not enforce the 2013 final rule in a manner inconsistent with the amendments to section 13 of the BHC Act with respect to institutions excluded by the statute and with respect to the naming restrictions for covered funds,” the proposal states. “Additionally, the specific regulatory amendments proposed herein would not be inconsistent with the recent statutory amendments to section 13 of the BHC Act.”
Proposed Revisions to Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships With, Hedge Funds and Private Equity Funds