News

The Economic Growth, Regulatory Relief, and Consumer Protection Act (Economic Growth Act), which passed the US Senate in March, the US House of Representatives in May, and was signed into law by the President on May 24, 2018, modestly scales back certain requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the Dodd-Frank Act) and provides other regulatory relief.

The Economic Growth Act primarily benefits community banks—those with $10 billion or less in assets. But certain key provisions are beneficial to midsized and larger bank holding companies and financial institutions, with many changes being made to the enhanced supervision and enhanced prudential standards requirements under section 165 of the Dodd-Frank Act. Domestic and non-US banking organizations with $250 billion or more in aggregate assets benefit the least from the amendments. Many of the provisions of the Economic Growth Act take effect immediately, although a few are phased in over time or will require agency action. Below is further discussion on regulatory relief made available for larger banking organizations and nonbank financial companies that are designated as systemically important financial institutions (SIFIs), as well as community banks, under titles II and IV of the Economic Growth Act, and summaries of other regulatory relief extended to financial firms generally under the new banking law. For a detailed analysis of all of the provisions of the Economic Growth Act, please see our prior alert following the Senate passage here.

We anticipate the amendments will modestly reduce administrative and compliance costs and spur mergers and acquisitions in the community and midsized banking space, and will simplify acquisitions of midsized and large nonbank financial companies by large banking organizations.

I. Changes to Enhanced Supervision by the Federal Reserve Board and Enhanced Prudential Standards under Section 165 of the Dodd-Frank Act

A. Enhanced Prudential Threshold Raised from $50 billion to $250 billion for Bank Holding Companies

Under section 165 of the Dodd-Frank Act, bank holding companies with $50 billion or more in total consolidated assets were subject to enhanced supervision by the Board of Governors of the Federal Reserve System (Federal Reserve Board) and a range of enhanced prudential standards, including risk-based capital requirements and leverage limits, liquidity requirements, risk management requirements, resolution planning and credit exposure report requirements, concentration limits, and any other additional standards established by the Federal Reserve Board. Nonbank financial companies were not subject to these requirements unless designated as systemically important by the Financial Stability Oversight Council (FSOC). Section 401 of the Economic Growth Act raises the enhanced prudential supervision threshold for bank holding companies from $50 billion to $250 billion in total consolidated assets. Bank holding companies with total consolidated assets between $50 billion and $100 billion are exempt from enhanced prudential standards immediately, and bank holding companies with total consolidated assets between $100 billion and $250 billion will become exempt in November 2019, unless the Federal Reserve Board decides to use its exemptive authority to exempt the bank holding companies earlier than that date. For bank holding companies with total consolidated assets between $100 billion and $250 billion, after November 2019, the Federal Reserve Board will have the authority to apply enhanced prudential standards on a tailored, case-by-case basis, if the Federal Reserve Board deems it necessary based on certain risk-related factors.

In connection with raising the asset threshold for enhanced supervision under section 165 of the Dodd-Frank Act, the Economic Growth Act also makes conforming amendments to the Financial Stability Act of 2010 (under Title I of the Dodd-Frank Act). These amendments raise from $50 billion to $250 billion the applicable asset threshold for when FSOC should consider designating under section 113 of the Dodd-Frank Act a nonbank financial company as a SIFI, or when FSOC may require reports of conditions from such institutions (sections 115 and 116 of the Dodd-Frank Act, respectively), and when the Federal Reserve Board may (with an affirmative vote of a majority of FSOC) limit the ability of a company to engage in expansionary activities (i.e. mergers and acquisitions), offer certain financial products, or operate in certain business lines. Additionally, the Economic Growth Act provides that an institution that is identified as a global systemically important bank holding company (G-SIB) will be subject to enhanced supervision and enhanced prudential standards, regardless of asset size, as the case for institutions with consolidated assets of $250 billion or more.

The Economic Growth Act also eliminates or reduces assessment fees to be paid to the Office of Financial Research under section 155 of the Dodd-Frank Act and to the Federal Reserve Board under section 11 of the Federal Reserve Act by bank holding companies with less than $250 billion in total consolidated assets. Additionally, the Economic Growth Act eliminates prior notice requirements for nonbank acquisitions under section 4(k) of the Bank Holding Company Act by financial holding companies with less than $250 billion for acquisitions of nonbank companies with total consolidated assets of $10 billion, and raises the asset threshold for prohibited management interlocks between SIFIs, larger bank holding companies and nonaffiliated nonbank SIFIs from $50 billion to $250 billion.

These amendments took effect as of May 24, 2018, the enactment date of the Economic Growth Act, for all bank holding companies with less than $100 billion in total consolidated assets, and will take effect in November 2019 for all other financial institutions, unless the Federal Reserve Board exempts by rule or order any other bank holding company.

B. Elimination of Supervisory Stress Testing and Company-Run Stress Testing for Institutions with Less Than $100 Billion in Assets

In addition to the enhanced prudential standards described above, bank holding companies and SIFIs subject to section 165 of the Dodd-Frank Act were also subject to supervisory stress tests under section 165(i) and required to conduct company-run stress tests on a semi-annual basis. The Economic Growth Act eliminates the supervisory stress tests for bank holding companies with less than $100 billion in total consolidated assets, and makes the supervisory stress tests of bank holding companies with more than $100 billion but less than $250 billion in total consolidated assets "periodic" rather than annual. In addition, company-run stress tests by bank holding companies with $250 billion in total consolidated assets, and SIFIs once appropriate regulations are developed for commencement of such, will be required periodically rather than semi-annually. These changes will likely impact the Federal Reserve Board's Comprehensive Capital Analysis Review (CCAR), which includes supervisory stress testing that typically aligns with the supervisory stress testing cycle, and may result in only institutions with $250 billion in total consolidated assets being participants in the annual CCAR process.

Also, under section 165(i), all insured depository institutions with $10 billion or more in total consolidated assets were required to conduct and report to their primary federal bank regulators annual company-run stress tests (DFAST stress testing). The Economic Growth Act raises the asset threshold for required DFAST stress testing for all financial institutions from $10 billion to $100 billion, and makes the requirement "periodic" rather than annual. Furthermore, the adverse scenario has been eliminated, therefore future stress testing will require only two scenarios (the baseline and severely adverse scenarios). Bank holding companies with less than $100 billion in total consolidated assets, were immediately exempt from stress-testing requirements upon enactment of the law, but due to what we assume to be a legislative drafting error, insured depository institutions will not be exempt until November 2019.

C. Applicability of Enhanced Prudential Standards for Bank Holding Companies with $100 billion or more but less than $250 billion in Total Consolidated Assets

In addition to eliminating the statutorily-mandated resolution planning requirements, enhanced liquidity requirements, and other prudential requirements for bank holding companies with less than $100 billion in total consolidated assets, the Economic Growth Act requires, rather than allows, the Federal Reserve Board to tailor enhanced prudential standards to banking organizations subject to these standards, either on an individual basis or by category, taking into consideration the institutions' complexity, financial activities, size, capital structure, riskiness, and other risk-related factors. Although bank holding companies with more than $100 billion but less than $250 billion in total consolidated assets may be exempt from enhanced prudential standards in November 2019 or earlier by action of the Federal Reserve Board, the Federal Reserve Board retains the authority to subject such bank holding companies to any prudential standard under section 165, if the Federal Reserve Board determines that the prudential standard is appropriate to prevent or mitigate risks to the financial stability of the US, promote the safety and soundness of the bank holding company, and after taking into consideration the bank holding company's capital structure, riskiness, complexity, financial activities, and other risk-related factors.

The Economic Growth Act also eliminates the requirement for periodic credit exposure reports by banking organizations under section 165 of the Dodd-Frank Act and moves it to an additional standard that may be required by the Federal Reserve Board as an enhanced prudential standard.

D. Applicability of Enhanced Prudential Standards Applied Against Foreign Banking Organizations

The US operations of foreign banking organizations (FBOs) are also subject to enhanced prudential standards under section 165 of the Dodd-Frank Act, with FBOs having less than $50 billion in total US-based assets being subject to enhanced prudential standards on a more limited basis, in deference to the supervisory agencies of their home countries. Pursuant to regulations of the Federal Reserve Board, FBOs that have $100 billion or more in global consolidated assets with greater than $50 billion in US non-branch assets are required to have US-based intermediate holding companies (IHCs), which are subject to the Federal Reserve Board's enhanced supervision and enhanced prudential standards. The Economic Growth Act does not modify this requirement, which results in an inconsistency where some FBOs with more than $50 billion in US non-branch assets but less than $100 billion in total US assets will remain subject to the enhanced supervision and enhanced prudential standards while bank holding companies with more than $100 billion but less than $250 billion in total assets may be exempt. The Federal Reserve Board will likely consider amending its regulations for IHCs of FBOs to conform with new regulations that will be issued for domestic bank holding companies by raising the trigger for enhanced prudential standards to $250 billion in total US- based assets. The Economic Growth Act does not address whether FBOs with over $250 billion in total consolidated assets, but less than $50 billion in US assets, should be subject to enhanced prudential standards, but the Federal Reserve Board will likely address such in its regulations.

II. Community Bank Relief

Title II of the Economic Growth Act provides regulatory relief to community banks, which are generally characterized in the statute as banking organizations with less than $10 billion in total consolidated assets and with limited trading activities. Under the Economic Growth Act, community banks are exempt from the Volcker Rule and its proprietary trading prohibitions, and will benefit from simplified capital rules that are more akin to the Basel I capital rules once the federal banking regulators develop the statutorily mandated community bank leverage ratio. Section 101 of the Economic Growth Act amends the Truth In Lending Act (TILA) to add a safe harbor for "plain vanilla" mortgage loans originated by banking organizations and credit unions with less than $10 billion in total consolidated assets under existing "QM" and ability to pay rules. This amendment would allow community banks to exercise greater discretion in lending decisions.

In addition, community banks with less than $5 billion in total consolidated assets will benefit from reduced reporting requirements on call reports for the first and third quarters of a reporting year, and banks with less than $3 billion in total consolidated assets now qualify for extended exam cycles (18-months rather than 12-months) and for supervisory treatment under the Federal Reserve Board's Small Bank Holding Company Policy Statement, which must be revised by November 2018 to increase the applicability asset threshold from $1 billion to $3 billion. These changes may spur more new bank formations or encourage more expansionary activities among community banks.

III. Other Regulatory Relief and Consumer Protections

A. Changes to Risk Committee Requirements for Publicly Traded Bank Holding Companies

Section 165 of the Dodd-Frank Act mandated that the Federal Reserve Board required publicly traded bank holding companies with total consolidated assets of $10 billion or more to establish a risk committee for the oversight of the enterprise-wide risk management practices of the institution. It also authorized the Federal Reserve Board to require publicly traded bank holding companies with less than $10 billion to establish similar risk committees if deemed necessary to promote sound risk management practices. Section 401 of the Economic Growth Act raised the asset threshold from $10 billion to $50 billion for each of these provisions.

B. Easing of Volcker Rule Restrictions on Common Names Between Banking Entities and Sponsored Funds

Section 204 of the Economic Growth Act amends the Volcker Rule to remove the restriction that generally prohibits hedge funds and private equity funds from having the same name or a variation of the same name as a "banking entity" that is an investment adviser to the fund. But this amendment keeps in place the prohibition on sharing a name with a bank. As mentioned above, banking organizations with less than $10 billion in aggregate assets will no longer be subject to the Volcker Rule.

C. Flexibility under Charters of Federal Savings Associations

Section 206 of the Economic Growth Act amends the Home Owners' Loan Act by providing federal savings associations with less than $20 billion in consolidated assets with the option to elect to operate under the same powers as a national bank. Federal savings associations that make the election would continue to be subject to Federal savings association rules and regulations with respect to governance, corporate changes, and as otherwise determined by the OCC. Entities considering this option will need to consider Qualified Thrift Lender issues and possible associated implications.

D. Treatment of Deposits Held at Central Banks Under the Supplementary Leverage Ratio

Section 402 of the Economic Growth Act requires Federal banking agencies to amend their supplementary leverage ratio (SLR) rule for custodial banks to exclude funds of a custodial bank that are placed with the Federal Reserve Banks, the European Central Bank, and certain other central banks that are member countries of the Organization for Economic Cooperation and Development. This amendment would address criticisms that the Federal Reserve Board's enhanced SLR rule, which requires banks to maintain a specified amount of loss-absorbing capital to cover total leverage exposure, including off-balance sheet liabilities, imposes unnecessary burdens on the holding companies of custodial banks.

E. Municipal Bonds Treated as HQLAs under Liquidity Coverage Ratio Rule

The liquidity coverage ratio rule (LCR Rule), banking organizations are required to hold specified amounts of high quality liquid assets (HQLAs) that can be readily converted into cash in period of financial stress based on elaborate calculations of near-term liabilities. The initial LCR Rule did not include any US municipal securities as HQLAs, and in April 2016, the Federal Reserve Board issued regulations classifying some but not all US municipal securities as HQLAs. Section 403 of the Economic Growth Act now requires the federal banking agencies to amend the LCR Rule by August 2018 to classify all qualifying investment-grade, liquid and readily-marketable municipal securities as level 2B liquid assets. This change now makes municipal bonds more attractive to covered banks, due to the high-quality treatment and the tax-exempt benefits.

If the LCR Rule is viewed as an implementation of the liquidity requirements of Section 165 of the Dodd-Frank Act and not authorized by some other rulemaking authority of the banking agencies, it might become inapplicable to bank holding companies with less than $250 billion in assets unless the agencies impose it on a case-by-case basis to a bank holding company with between $100 billion and $250 billion in assets.

F. Reciprocal Deposits No Longer "Brokered Deposits."

Section 202 of the Economic Growth Act exempts "reciprocal deposits" from treatment as "brokered deposits" under 12 U.S.C. § 1831f and the FDIC's brokered deposits rule, up to the lesser of $5 billion or 20 percent of bank liabilities. "Reciprocal deposits" are deposits obtained through a deposit placement network, where customer deposit balance amounts above the FDIC deposit insurance limits received by a bank are transferred to other banks in the network and held for the originating bank's customers in exchange for a similar "reciprocal" amount of deposit balances from those other banks' customers held through the network at the first bank.

G. TRID Rule Clarification; Fast Closing on Reduced Rate Loans

Section 109 of the Economic Growth Act eliminates the three-day waiting period required under TILA and the Real Estate Settlement Procedures Act in connection with second offers for mortgage credit with a lower APR to the borrower. In addition, the Bureau of Consumer Financial Protection (Bureau) is now required to provide additional guidance on the applicability of the Truth in Lending Disclosure (TRID) Rules with respect to mortgage assumption transactions and construction-to-permanent home loans. Additional clarification is also expected as to when lenders may rely on model disclosures prior to the incorporation of changes in TRID regulations into the forms.

H. Capital Relief for some HVCRE Loans

Section 214 of the Economic Growth Act provides relief from risk-based capital treatment for certain high volatility commercial real estate (HVCRE) loans by prohibiting federal banking agencies from requiring banking organizations to assign heightened risk weights to HVCRE loans unless the loan is related to real estate acquisition, development and construction (referred to as "HVCRE ADC" loans). Under the Basel III capital rules, HVCRE ADC loans are assigned a higher risk weight than other commercial real estate loans, and therefore require the banking organizations to hold additional capital against such loans.

I. Securities and Capital Formation

Title V revises certain rules under the Securities Exchange Act of 1934 (Exchange Act) to remove or ease burdens associated with raising capital, including extending exemptions to Blue Sky laws for all national securities exchanges, extending exemptions from the definition of "investment company" under the Investment Company Act to venture capital funds with fewer than 250 beneficial owners, reducing SEC reporting requirements in connection with public offerings, and establishing parity between close-end registered investment companies and other issuers, including "well-seasoned issuers" for security offerings and proxy rules.

J. Additional Consumer and Service Member Credit and Foreclosure Protections

Title III of the Economic Growth Act provides consumers with additional credit protections, with specific credit protections afforded to veterans (to protect against negative reports related to unverified medical expenses and predatory lending) and active military personnel (foreclosure relief). Under section 301, consumer reporting agencies are now required to establish websites that allow consumers to request fraud alerts, opt-out of allowing the agencies to use consumer reports for solicitation purposes, and request unlimited credit freezes and unfreezes for at least a one-year period. Additional credit protections are also available for minors and incapacitated persons. Section 302 requires consumer reporting agencies to provide free electronic credit monitoring services to active duty military personnel, and amends the Fair Credit Reporting Act (FCRA) to provide special protections to veterans with respect to the reporting of medical debt, in addition to requiring the US Department of Veteran Affairs to establish a database to allow consumer reporting agencies to verify a veteran's medical debt. Sections 309 and 313 provide veterans with protections against foreclosures, and section 304 provides foreclosure protections to allow consumers by restoring the "Protecting Tenants at Foreclosure Act of 2009." Section 307 requires the Bureau to develop regulations to ensure that consumer protections are baked into financing arrangements for home improvement loans for clean energy purposes and that rely on property tax assessments (commonly known as PACE loans). Section 310 requires the Federal Housing Financing Agency to develop new credit scoring models to be used by the government-sponsored entities, Fannie Mae and Freddie Mac in purchasing residential mortgages from the industry.

K. Additional Consumer Protections Related to Student Loans

Title VI of the Act affects certain aspects of student lending and credit reporting related to student loans. Section 601 prohibits financial institutions from accelerating private student loan debt solely on the basis of bankruptcy or death of a cosigner, and section 602 amends FCRA to allow student borrowers to request removal of a reported default of a private education loan. In addition, section 603 requires the US Treasury Department's Financial Literacy and Education Commission to establish best practices for institutions of higher education, including methods to ensure that students are well informed of their total borrowing obligations.

IV. Anticipated Changes to the Banking Industry Driven by the Economic Growth Act

Reduced Costs and Burdens on Community Banks. Banking organizations with less than $10 billion in assets (i.e., community banks) received far more regulatory relief than larger banks from the Economic Growth Act. Community banks received simplified capital requirements, extended examination cycles, reduced reporting requirements, a Volcker Rule exemption, TILA, additional qualified mortgage or "QM" coverage, and other regulatory relief under the Economic Growth Act. Community banks may now bear lower administrative burdens and costs than larger banking organizations and become more effective competitors.

Benefits to Midsized Banks. Midsize banks and those that are on the cusp of $50 billion in total consolidated assets may now engage in more expansionary activities without being concerned about enhanced supervision and enhanced prudential standards under the Dodd-Frank Act. Many of these banks have avoided crossing the $10 billion and $50 billion size thresholds over the past few years to avoid some of the expensive and burdensome requirements of Section 165 of the Dodd-Frank Act triggered by passing those size thresholds. In addition, the raising of the automatic trigger from $50 billion to $250 billion provides substantial regulatory relief to larger banking organizations that could result in M&A and organic growth activity by regional banks with above $50 billion in total consolidated assets.

Little Relief for Large Banks. The Economic Growth Act provided limited regulatory relief for banking organizations with $250 billion or more in consolidated assets. These larger institutions, may however, seek regulatory relief from the federal financial regulators, including by seeking additional Volcker Rule modifications and other administrative reforms. We note that roughly two-thirds of the changes recommended in the Treasury Department's June 2017 report on bank regulatory reform are for rulemakings and policy changes at the agency level, with only one third being legislative.

Implementation. As noted, certain provisions of the Economic Growth Act became effective immediately upon enactment or will become effective upon a specified date. However, certain provisions require action by the federal banking regulators, such as the development of the community bank leverage ratio, which will only be effective once final rules are released. The overall rulemaking process can be time-intensive, due to the agencies' review process as well as required notice and public comment periods. Fortunately, officials from the federal banking agencies have already began reviewing regulations and discussing ways to reduce regulatory burden, including with respect to the capital rules and the Volcker Rule, as well as in areas not covered by the Economic Growth Act. The agencies have also indicated an interest in working with the industry to eliminate regulatory inefficiencies. On May 30, 2018, the Federal Reserve Board in an open board meeting requested comment on interagency proposed rules to simplify and tailor compliance requirements under the Volcker Rule.1 In connection with proposing those changes, the Federal Reserve Board noted that it will separately be amending the rules implementing the Volcker Rule to incorporate legislative changes made by the Economic Growth Act.

V. Legislation in the Pipeline

House Financial Services Committee Chairman Jeb Hensarling (R-TX) has indicated his intention to seek further consideration this year for a number of additional financial regulatory reform measures, and released a list of 29 such bills during the US Senate's consideration of the Economic Growth Act in March (see a description of these measures in our March Advisory). The Economic Growth Act touches on, but does not include in full, the legislation in the 29 House bills. The US House of Representatives, however, agreed to pass the Economic Growth Act without amendment in consideration of the Senate agreeing to consider financial regulatory relief legislation to be packaged into a House bill sometime this year.

Most recently, Hensarling succeeded in attaching nearly 30 financial regulatory relief measures in the FY 2019 Financial Services Appropriations Measure (FY 2019 Bill), which include certain bills discussed in our March Advisory as well as 12 additional bills. The 12 bills include those focused on harmonizing Volcker Rule regulations (which community banks are now exempt from) by giving the Federal Reserve Board exclusive rulemaking authority, subjecting the Bureau and the Director of the Bureau to greater oversight (including subjecting the Bureau to appropriations, making the Director removable at-will rather than "for cause" by the President, and subjecting the Bureau's rulemakings to congressional review), and requiring the Federal Reserve Board to ensure that companies with similar risk profiles and business models are treated similarly when imposing enhanced prudential standards under section 165 of the Dodd-Frank Act. Below is a summary of the bills included in the FY 2019 Bill that were not discussed in our March Advisory.

  • Tailored Application of Prudential Standards. The bill would amend section 165 of the Dodd-Frank Act to require the Federal Reserve Board to ensure that companies with similar risk profiles and business models operate under the same enhanced prudential standards.
  • H.R. 4061, the Financial Stability Oversight Council Improvement Act. The bill would require FSOC to consider the appropriateness of imposing heightened prudential standards instead of other regulations to mitigate financial stability risks when determining whether to subject a nonbank financial institution to Federal Reserve supervision. The bill passed the House in April 2018 on a vote of 291-121.
  • H.R. 4790, Volcker Rule Regulatory Harmonization Act. The bill amends the Volcker Rule to provide the Federal Reserve Board with exclusive rulemaking authority, in consultation with the OCC, FDIC, SEC, and CFTC, as appropriate, and to consider the recommendations of FSOC in issuing regulations under the Volcker Rule. The bill passed the House in April 2018 on a vote of 300 to 104.
  • Bureau of Consumer Financial Protection-Inspector General Reform Act. The bill would repeal the Fed Chairman's authority to appoint a Bureau Inspector General and amend Dodd-Frank to create and Inspector General for the Bureau. This bill has not been voted out of committee.
  • BCFP (Bureau of Consumer Financial Protection) on Appropriations.The bill would limit the amount that the Director may request for funding from the Federal Reserve Board to $485 million for the 2019 fiscal year, and subjects the Bureau to the appropriations process and financial audits starting in the year 2020.
  • Authority to Remove Bureau Director. This provision included in the FY 2019 bill would strike the "for cause" restriction on the ability of the President to remove the Bureau Director, and thereby make the Bureau Director removable at-will of the President.
  • Congressional Review of Bureau Rulemaking. This provision included in the FY 2019 bill would require the Bureau to submit proposed rules for congressional review. Non-major rules would go into effect after submission to Congress, while major rules would require a joint resolution of approval before going into effect.
  • H.Amdt. 34 to H.R. 238, regarding the treatment of transactions between affiliates. This amendment would clarify that inter-affiliate swaps are not subject to the same regulatory requirements as external, market-facing swaps between third parties. The amendment passed in January 2017 by a vote of 236-191 as part of the Commodity End-User Relief Act.
  • H.R. 2364, Investing in Main Street Act of 2017. The bill raises the maximum amount that an insured depository institution or Federal savings association may invest in small business investment companies from 5 percent of the capital and surplus of the bank to 15 percent, and includes a definition for "appropriate federal banking agency." The bill passed the House in July 2017.
  • H.R. 435, the Credit Access and Inclusion Act. The bill would allow landlords, utility, and telecom companies to report on-time payment data to credit reporting agencies. The bill passed the House in February 2018 unanimously as part of H.R. 5078, the TRID Improvement Act.
  • H.R. 2219, the End Banking for Human Traffickers Act. The bill would add the Treasury Secretary to the President's Interagency Task Force to Monitor and Combat Trafficking to increase the role of the financial industry in combating human trafficking. The task force would also be directed to recommend to Congress revisions of anti-money laundering programs to target operations related to human trafficking. The bill passed the House in April 2018 on a vote of 408-2.
  • H.R. 4464, Common Sense Credit Union Capital Relief Act. The bill would repeal the October 15, 2015 National Credit Union Administration's final Risk-Based Capital Rule. The bill was voted out of committee in December 2017 by a vote of 33-25.

While it is far from clear whether Chairman Hensarling will succeed in getting the Senate to go along with these measures—particularly through use of an appropriations vehicle—it is further evidence that he is exploring all options to get additional reforms enacted this year.

*Amber A. Hay contributed to this Advisory. Ms. Hay is a graduate of University of Michigan Law School and is employed at Arnold & Porter's Washington, DC office. Ms. Hay is not admitted to the practice of law in Washington, DC.

© Arnold & Porter Kaye Scholer LLP 2018 All Rights Reserved. This Advisory is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

  1. The proposed changes, jointly developed by the Federal Reserve Board, OCC, FDIC, SEC and CFTC, include: (i) tailoring the rules compliance requirements based on the size of a firm's trading assets and liabilities, (ii) clarifying the definition of "trading account" by relying on commonly used accounting definitions, (iii) clarifying that firms that trade within appropriately developed internal risk limits are engaged in permissible market making or underwriting activity, (iv) streamlining the criteria that applies when a banking entity seeks to rely on the hedging exemption from the proprietary trading prohibition, (v) limiting the impact of the Volcker Rule on the foreign activity of foreign banks, and (vi) simplifying the trading activity information that banking entities are required to provide to the federal regulators. Press Release, Federal Reserve Board asks for comment on proposed rule to simplify and tailor compliance requirements relating to the "Volcker Rule" (May 30, 2018) (last visited May 30, 2018).

People

Email Disclaimer