Financial Regulatory Forum

By Thomson Reuters Accelus staff

NEW YORK, Oct. 19 (Business Law Currents) – Banking lawyers should be forgiven if they’re not returning calls right away: they’re busy trying to digest the Volcker Rule (or “the rule”). The proposed rule’s 298-page doorstop represents the collective efforts of the Treasury Department, Fed, FDIC and SEC to implement §619 of the Dodd-Frank Act, which itself added a new §13 to the Bank Holding Company Act of 1956 (the BHC Act). The intent of the Volcker Rule is to “generally prohibit any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund (“covered fund”), subject to certain exemptions.”

So does the Volcker Rule satisfy its mandate? To paraphrase ‘The Simpsons’: yes with an “if,” no with an “unless.” The rule carves out significant exemptions from the proscription against proprietary trading, but each of these exceptions has a number of criteria required to take advantage of the exemption. Moreover, a number of the rule’s measures provide for rebuttable presumptions of non-compliance for certain types of trading activity. (more…)

WASHINGTON, Feb 2 (Reuters) – A key U.S. bank regulator on Tuesday voiced concerns about proposals that would require securitizers to keep “skin in the game,” saying rigid rules are not the best solution.

Comptroller of the Currency John Dugan, who regulates the nation’s largest banks, said forcing banks and other securitizers to meet mandatory risk retention requirements is an imprecise solution to improve the lax underwriting, which fueled the subprime mortgage crisis and subsequent financial meltdown.

President Barack Obama and House Democrats favor requiring banks and other securitizers of loans, such as mortgages, to retain on their books at least 5 percent of the risk of debt converted into securities and sold to investors.