FDIC, OCC Finalize Volcker Overhaul Proposal

The FDIC and the OCC today approved a long-awaited set of changes to the Volcker Rule simplifying the rule’s compliance burden and better targeting its effects toward intended activities. The final rule streamlines and tailors the Volcker Rule by focusing its restriction on proprietary trading and investments in covered funds on banks with “significant’ and “moderate” trading activities. Banks with limited trading assets and liabilities of less than $1 billion will have a rebuttable presumption of compliance with the Volcker Rule. Once approved by the Federal Reserve, SEC and CFTC, the changes will take effect on Jan. 1, 2020, with mandatory compliance not required until Jan. 1, 2021.

“We appreciate the actions taken today by the FDIC and OCC, which have started the agencies’ process of finalizing sensible reforms to the Volcker Rule that will help banks better serve their customers and the broader economy,” said American Bankers Association President and CEO Rob Nichols. “These improvements will allow bank supervisors to focus on systemic risk, while providing the tailored and precise oversight that was the Volcker Rule’s original purpose.”

As advocated by ABA, the final rule does not include the proposed accounting prong in the trading account definition. Instead, it makes meaningful improvements to the so-called 60-day rebuttable presumption that provide clear boundaries between permissible and prohibited trading.

ABA has been actively engaged with its Volcker Rule working groups to identify and address issues with the rule throughout the rulemaking process, and a number of ABA’s recommendations were incorporated into the final rule. The agencies are also expected to issue another proposal in the coming days that would focus on changes to the restrictions on covered fund investments. “We look forward to providing additional input that would simplify and streamline restrictions on covered fund investments while excluding funds that are clearly outside the Volcker Rule’s intent,” Nichols added.