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Regulators Respond to ICBA Pressure on Volcker Rule

Washington, D.C. (Jan. 14, 2014)—Federal banking regulators today responded to the Independent Community Bankers of America’s® (ICBA) repeated calls for them to take action to rectify a Volcker Rule provision that could negatively affect hundreds of community banks. Following ICBA’s tireless efforts and frequent communications and meetings with the banking agencies and Congress seeking a resolution, the regulators today released an interim final rule that is designed to mitigate the impact of a Volcker Rule provision requiring banks to divest by July 2015 their holdings of certain pools of securities known as collateralized debt obligations (CDOs) backed by trust-preferred securities (TruPS).

“ICBA has been relentlessly working and meeting with regulators and Congress on this issue since the federal banking agencies issued the Volcker Rule, and today regulators have responded,” ICBA President and CEO Camden R. Fine said. “The TruPS CDO provision of the final Volcker Rule issued in December would have significantly affected community banks across the nation and the communities they serve.”

The interim final rule released today permits banks to retain TruPS CDOs they owned as of Dec. 10, 2013, if the CDOs were issued before May 19, 2010, and are backed primarily by TruPS or subordinated debt of bank holding companies that had less than $15 billion in assets when the securities were issued or of mutual holding companies. Regulators have provided a non-exclusive list of the TruPS CDOs that meet this test. The rule will avoid the dramatic market impact of revised accounting treatment and forced divestiture of these securities. This is an important response to ICBA’s repeated calls for the regulators to exempt TruPS CDOs from the Volcker Rule.

ICBA has worked with members of Congress to introduce House and Senate legislation to exempt these instruments from the Volcker Rule. S. 1907, introduced by Sens. Mark Kirk (R-Ill.) and Mike Crapo (R-Idaho), and H.R. 3819, introduced by Reps. Shelley Moore Capito (R-W.Va.) and Jeb Hensarling (R-Texas), would prohibit the Volcker Rule from requiring banks to divest their holdings of TruPS CDOs issued before Dec. 10, 2013. ICBA thanks these and other lawmakers for their help in seeking a remedy for the association’s TruPS concerns and for keeping the pressure on the bank regulators to fix this problem. 

ICBA will assess the impact of the interim final rule released today and will weigh options for pursuing additional relief measures as necessary.

About ICBA
The Independent Community Bankers of America®, the nation’s voice for nearly 7,000 community banks of all sizes and charter types, is dedicated exclusively to representing the interests of the community banking industry and its membership through effective advocacy, best-in-class education and high-quality products and services. For more information, visit www.icba.org.

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