Quarles: Volcker Rewrite On Its Way; Will Include Clearer Definitions

In a speech to a group of international bankers today, Federal Reserve Vice Chairman for Supervision Randal Quarles provided some hints about what might be included in a long-awaited rewrite of the Volcker Rule that banking agencies are currently working on. He said the agencies expect to solicit public input on their Volcker revision, and that with all five agencies now in “full cooperation . . . we expect this process will proceed with dispatch.”

Specifically, he said that regulators are examining providing clearer and more transparent definitions of terms like “proprietary trading” and “covered fund,” noting that “we want banks to be able to engage in market making and provide liquidity to financial markets with less fasting and prayer about their compliance with the Volcker rule.” The American Bankers Association specifically urged the Fed to limit and clarify definitions like “covered fund” in a letter last fall.

Quarles also said the regulators would like to revisit the extraterritorial application of the Volcker Rule for foreign banking organizations and that they are seeking to align Volcker compliance with the broader supervisory regime. He did cautioned that there are limits to what the agencies can do — for example, carving out community banks entirely, which is a provision in S. 2155, the bipartisan Senate regulatory reform bill up for a vote this week.