ABA and the state bankers associations wrote to federal banking regulators to stress the urgency of addressing the unintended consequences of the Volcker Rule’s treatment of bank investments in trust preferred securities.
The urgency is “due to the rapidly approaching end of the quarter and the calendar year. Even though the provisions of the regulations are scheduled to go into effect in 2015, accounting practices triggered by the implementing regulations could subject many banks to imminent financial losses,” the associations said.
Under the rule approved last week, collateralized debt obligations that are backed by TruPs are considered “covered funds” subject to Volcker Rule restrictions. The resulting accounting treatment will cause some banks to face significant capital charges.
Read the letter.
In addition, ABA has made available a summary of the Volcker treatment of TruPS. The summary covers the rule’s accounting implications and offers action items for banks, including evaluating investments and determining when and how to divest any prohibited funds.
Read the summary.