On Monday, September 16, the Commodity Futures Trading Commission (the “CFTC” or the “Commission”) announced that it has approved final regulations (the “final rule”) that will streamline and clarify the Volcker Rule – a statutory provision that generally prohibits banking entities from engaging in proprietary trading, or from taking an ownership interest in, sponsoring, or having certain other relationships with hedge funds or private equity funds (collectively “covered funds”).  The final rule has already been approved by the Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency, but remains to be approved by the Securities and Exchange Commission and the Board of Governors of the Federal Reserve System.
Continue Reading CFTC Becomes Third Federal Financial Regulator to Approve Volcker Rule Reforms

On Tuesday October 2, leaders of the federal prudential regulators testified before the Senate Committee on Banking, Housing, and Urban Affairs (“Banking Committee”) on their agencies’ efforts to implement the Economic Growth, Regulatory Relief, and Consumer Protection Act (“EGRRCPA” or the “Act”). All of the regulators expressed support for the goals of EGRRCPA, particularly with respect to tailoring regulations, and highlighted the steps being taken to implement the law.

The witnesses at the hearing were: Joseph Otting, Comptroller, Office of the Comptroller of the Currency (“OCC”); Randal Quarles, Vice Chairman for Supervision, Board of Governors of the Federal Reserve System (“FRB”); Jelena McWilliams, Chairman, Federal Deposit Insurance Corporation (“FDIC”); and J. Mark McWatters, Chairman, National Credit Union Administration (“NCUA”).

This post summarizes below, as highlighted in the witnesses’ testimony:

  • some of the key steps these agencies have taken to implement the Act, which include the release of a number of proposed and interim final rules; and
  • the steps the agencies intend to take next, including tailoring enhanced prudential standards for larger bank holding companies (“BHCs”).

Continue Reading After Senate Banking Committee Testimony, Where Does Dodd-Frank Reform Stand?

This morning, the Office of the Comptroller of the Currency (“OCC”) released a Request for Information (“RFI”) to determine how regulations implementing the Volcker Rule should be revised to better accomplish the purposes of the statute.

The OCC’s release notes that the information the agency is soliciting could support revisions to the regulation that are consistent with the recommendations identified in the U.S. Department of the Treasury’s June 2017 regulatory reform report, which we summarized in a client alert.  However, broad-based reform of the Volcker Rule, including some of the changes recommended in the Treasury Report, would require legislative changes to the underlying statute, and the OCC’s RFI does not seek comments on changes to the statute.

Notably, the other federal financial agencies with concurrent rulewriting authority over the Volcker Rule – the Board of Governors of the Federal Reserve System, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and Commodity Futures Trading Commission – did not release the RFI jointly with the OCC.  The preamble to the RFI acknowledges that any revisions to the current regulation will need to involve those agencies.  As we discussed in a previous blog post, some of the other agencies are still led by appointees of President Obama and may be less likely to support reform of the regulation in the near-term.

Continue Reading OCC Issues Request for Information on the Volcker Rule

On Thursday, July 13, Federal Reserve Chair Janet Yellen testified before the Senate Banking Committee. During this hearing, Chair Yellen stated that the Federal Reserve (the “Fed”) is open to modifying the threshold for designating banks as systematically important financial institutions (“SIFIs”). She reiterated that the Fed would not oppose raising the current asset threshold—which

Federal financial agencies are taking steps to reevaluate the Volcker Rule as part of the Trump Administration’s review of financial regulations.  In a May 8, 2017 meeting of the Financial Stability Oversight Council, Treasury Secretary Steve Mnuchin reportedly directed the five agencies responsible for the Volcker Rule – the Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency (“OCC”), Federal Deposit Insurance Corporation (“FDIC”), Securities and Exchange Commission (“SEC”), and Commodity Futures Trading Commission (“CFTC”) – to reassess the rule.  The official readout of the meeting states that the Council “discussed efforts to assess the efficacy of the Volcker Rule.”

Secretary Mnuchin’s statements during his Senate confirmation hearings suggest that reform of the Volcker Rule could include focusing the rule on the activities of insured depository institutions rather than their affiliates, and revising the definition of proprietary trading to remove uncertainty about the line between prohibited proprietary trading and permissible market making.

Continue Reading Financial Regulators to Reassess Volcker Rule

Senators Jon Tester, D-Mont., and Jerry Moran, R-Kan., introduced a bill today (S. 1139) that would raise the threshold for a banking organization to be subject to Dodd-Frank Act Stress Tests (DFAST) to $50 billion in total consolidated assets from the current $10 billion threshold.  The bill, titled the Main Street Regulatory Fairness Act, would

On April 4, 2017, Federal Reserve Board Governor Daniel K. Tarullo gave his final speech as a governor before his departure from the Board the next day.  Governor Tarullo, widely considered the “most influential Wall Street regulator” during his term as governor, took the lead for the Federal Reserve in developing the agency’s most significant post-crisis regulations.

In his speech, Governor Tarullo defended the capital and stress testing requirements that the federal banking agencies have imposed on the largest banking organizations since the financial crisis.  Notably, he also identified certain areas where he believed Congress and/or the banking agencies could provide relief to banking organizations without jeopardizing financial stability.  Coming from one of the chief architects of the post-crisis regulatory regime, these remarks are noteworthy because they indicate areas for potential bipartisan consensus as Congress and President Trump’s appointees consider the path forward for regulatory reform.

Continue Reading Governor Tarullo Outlines Path to Regulatory Relief in Final Speech as Federal Reserve Board Member