A group of federal financial regulatory agencies recently sought public input regarding an effort to simplify and tailor the Volcker rule.
The manner of adjusting rule compliance requirements was developed by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission.
Under current guidelines, the Volcker rule generally restricts banking entities from engaging in prohibited proprietary trading and from owning or controlling hedge funds or private equity funds.
The federal financial regulatory agencies noted the proposed changes are intended to streamline the rule by eliminating or modifying requirements not necessary to effectively implement the statute while maintaining the core principles of the Volcker rule as well as the safety and soundness of banking entities.
Comments will be accepted for 60 days after the proposal’s publication in the Federal Register.
Significant proposed rule modifications include replacing the intent prong of the trading account definition and its 60-day trading account presumption with an accounting-based prong and a limited rebuttable presumption; expanding the market risk capital prong of the trading account definition to encompass foreign banks that are subject to Basel market risk capital requirements under their home country rules; and liberalizing the so-called TOTUS exemption for proprietary trading outside the United States by foreign banks by eliminating the funding restriction, permitting trades to be conducted with or through a U.S. entity.