Regions

US bank regulators mull Volcker rule tweak

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December 27
9:45 PM 2013

Bank regulators in the US said they will think about allowing banks to retain complex securities despite a prohibition on the Volcker rule that gave limitations on the risky investments they can own, Reuters reported. The announcement given on Friday, December 27, came in the wake of a lawsuit filed by banks that warned that they would experience huge losses from the new rule.

The action from the regulator was welcomed by the American Bankers Association or ABA. In a statement, ABA President Frank Keating said, "ABA appreciates the regulators taking this important step, and our experts are studying to see if the affected banks indeed find immediate interim relief from this action."

The Volcker rule does not allow lenders to own hedge funds or private equity funds to lessen risk. However, the prohibition included a kind of security that are considered harmless by a group of community banks, the report said.

In the announcement, the regulators said they would rethink if these instruments could be exempted and would arrive at a decision before January 15.

The report said an amendment would be the first polishing of the controversial Volcker rule designed to overhaul Wall Street after the crippling financial crisis that occurred from 2007 to 2009.

In the lawsuit, the banks asked the court to arrive at a decision before the year ends since they would be forced by accounting rules to write down $600 million in capital this quarter if they know that they would be divesting the securities later on, the report said. However, the regulators said that their decision to be given in the middle of next month was still early.

The report quoted them as saying, "The accounting staffs of the agencies believe that ... any actions in January 2014 that occur before the issuance of December 31, 2013, financial reports should be considered when preparing those financial reports."

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