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Tuesday, December 31, 2013

Volcker TruPS Proceedings Delayed as Agencies Promise Decision

The D.C. Circuit Court of Appeals has delayed proceedings in litigation over the Volcker Rule’s prohibition on banks holding debt interests in trust preferred securities (TruPS). The delay followed a statement by the Federal Reserve, FDIC, OCC and SEC saying that they would address by Jan. 15 whether to subject TruPS CDOs to the Volcker Rule.

The plaintiffs -- ABA and three community banks -- and the Fed, FDIC and OCC agreed to the delay, which will give the agencies until Jan. 17 to respond to ABA’s motion. Banks holding TruPS CDOs have been concerned that they may need to sell their ownership interests, often at a significant loss, and many banks will need to book those losses by the end of 2013.

In their statement, the agencies acknowledged community bank concerns and said they were considering whether it would be “appropriate and consistent” with the Dodd-Frank Act to subject TruPS CDOs to the Volcker Rule’s ownership prohibitions. In the meantime, they said their accounting staffs 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.”

In an update to bank CEOs, ABA President and CEO Frank Keating called this a “promising, if incomplete, development.” He added that “ABA’s ultimate goal remains an effective and comprehensive regulatory solution for banks. We will pursue that objective however we must -- including through continued legal action if need be.”

Read the CEO Update.
Read the agencies’ statement.
View ABA resources and legal filings on the Volcker Rule.
View media coverage of the Volcker Rule TruPS issue.

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