OCC BULLETIN 2013-41
Subject: Interagency Statement on Final Rule Implementing the "Volcker Rule"
Date: December 27, 2013
To: Chief Executive Officers of All National Banks and Federal Savings Associations, Federal Branches and Agencies, Department and Division Heads, All Examining Personnel, and Other Interested Parties
Description: Interagency Statement
The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the U.S. Securities and Exchange Commission (collectively, the agencies) issued a statement on December 27, 2013, indicating they are evaluating whether it is appropriate not to subject pooled investment vehicles for Trust Preferred Securities (TruPS) to the prohibitions on ownership of covered funds under the final Volcker Rule. The agencies intend to address this matter no later than January 15, 2014.
- Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) added a new section 13 to the Bank Holding Company Act of 1956 that generally prohibits a banking entity from engaging in proprietary trading and from investing in, sponsoring, or having certain relationships with a hedge fund or private equity fund (covered funds). These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions.
- The agencies and the U.S. Commodity Futures Trading Commission issued final rules implementing section 619, which become effective on April 1, 2014 (Final Rule). The Final Rule contains important definitions and descriptions of permissible and impermissible activities and requires banking entities to implement comprehensive compliance programs to ensure they do not engage in impermissible activities.
- A number of community banking organizations have expressed concern that the Final Rule conflicts with the congressional determination under section 171(b)(4)(C) of the Dodd-Frank Act to grandfather TruPS issued before May 19, 2010, by depository institution holding companies with total consolidated assets of less than $15 billion as of December 31, 2009; and by organizations that were mutual holding companies on May 19, 2010, for purposes of calculating Tier 1 regulatory capital.
- The agencies are currently reviewing this matter and are considering whether it is appropriate and consistent with the provisions of the Dodd-Frank Act not to subject pooled investment vehicles for TruPS, such as collateralized debt obligations backed by TruPS, to the prohibitions on ownership of covered funds in section 619 of the Dodd-Frank Act.
- The agencies intend to address this matter no later than January 15, 2014. The accounting staffs of the agencies believe that, consistent with generally accepted accounting principles, any actions in January 2014 that occur before the issuance of December 31, 2013, financial reports (which include the FR Y-9C and the call report), should be considered when preparing those financial reports.
Note for Community Banks
The agencies are evaluating whether it is appropriate not to subject pooled investment vehicles for TruPS, such as collateralized debt obligations backed by TRups, to the prohibitions on ownership of covered funds in the Final Rule. The agencies intend to address this matter of concern for community banks no later than January 15, 2014. Any such agency action should be considered in the filing of the December 31, 2013, call reports.
Amy S. Friend
Senior Deputy Comptroller and Chief Counsel