ABA Offers Three Regulatory Fixes for Volcker Rule

In a letter to Federal Reserve Governor Jerome Powell today, ABA President and CEO Rob Nichols welcomed Powell’s commitment to revise the Volcker Rule and offered three tweaks that the banking agencies can make to the rule without congressional action.

First, Nichols recommended limiting the definition of “covered funds” to funds engaged primarily in short-term proprietary trading. Then he suggested that the agencies could expand the covered fund exclusion for funds relying on a securities law exemption unrelated to the purposes of the Volcker Rule. Finally, he recommended narrowing the definition of the term “ownership interest” to reduce regulatory uncertainty.

“We believe that these changes to the covered fund provisions, taken together with revisions to the proprietary trading restrictions, would achieve these goals by tailoring the regulations alongside congressional intent, thereby addressing systemic risk while encouraging safe and sound banking practices and facilitating economic growth,” Nichols wrote.

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