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Two agencies approve easing of Volcker Rule

Yesterday, Comptroller of the Currency Otting and the Board of Directors of the FDIC approved a final rule tailoring and simplifying the “Volcker Rule” while maintaining core protections for the safety and soundness of the federal banking system. Once approved by the Federal Reserve Board, the amendments, which will be effective January 1, 2020, will:

  • tailor the rule's compliance requirements based on the size of a firm's trading assets and liabilities, with the most stringent requirements applied to banking entities with the most trading activity;
  • retain the short-term intent prong of the "trading account" definition from the 2013 rule only for banking entities that are not, and do not elect to become, subject to the market risk capital rule prong;
  • replace the rebuttable presumption that instruments held for fewer than 60 days are covered under the short-term intent prong with a rebuttable presumption that instruments held for 60 days or longer are not covered;
  • clarify that banking entities that trade within internal risk limits set under the conditions in this final rule are engaged in permissible market making or underwriting activity;
  • streamline the criteria that apply when a banking entity seeks to rely on the hedging exemption from the proprietary trading prohibition;
  • limit the impact of the rule on the foreign activities of foreign banking organizations; and
  • simplify the trading activity information that banking entities are required to provide to the agencies.
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