Volcker Rule: Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation Finalize Amendments to Implementing Regulations, with Approval by Other Agencies Expected to Follow; Additional Covered Funds-Related Amendments to be Addressed in Future Rulemaking

Sullivan & Cromwell LLP - August 22, 2019

On August 20, 2019, the OCC and FDIC approved a final rule amending the regulations implementing Section 13 of the Bank Holding Company Act of 1956, known as the “Volcker Rule.” The other agencies responsible for implementing and enforcing the Volcker Rule (the Federal Reserve, SEC and CFTC) are expected to approve in the near term substantially similar amendments to their respective implemental regulations. 

The final rule’s impact on particular banking organizations will differ significantly depending on the size, scope and nature of their businesses and operations, which is consistent with the federal banking agencies’ broad-gauged focus on regulatory “tailoring.” Consistent with the agencies’ overall approach to bank regulation, the final rule does not constitute a “roll-back” of the enhanced regulatory regime that evolved in the aftermath of the 2008 financial crisis and in response to the Dodd-Frank Act. Rather, it represents an effort to provide clarification, simplification and tailoring, and thereby reduce unnecessary compliance burden, without compromising the fundamental strengths and objectives of the post-crisis regulatory framework. 

The proprietary trading restrictions and compliance program requirements are the primary focus of the amendments. Limited amendments to the covered funds provisions are also included in the final rule, but the agencies intend to propose additional changes relating to the restrictions on covered fund investments and activities. Banking entities may opt into complying with the final rule beginning on the effective date of January 1, 2020, but may continue to comply instead with the currently effective regulations until the final rule’s compliance date of January 1, 2021.