Agencies Are Reviewing Treatment of Specified Collateralized Debt Obligations under Volcker Rule

The SEC, the Board of Governors of the Federal Reserve System (“FRB”), the FDIC, and the Office of the Comptroller of the Currency (“OCC”) (the “Agencies”) stated that they are reviewing whether it would be appropriate, and consistent with Dodd-Frank, not to subject collateralized debt obligations backed by trust preferred securities to the investment prohibitions of Dodd-Frank Section 619, or the Volcker Rule. 

According to the SEC release, a number of community banking organizations have expressed concern that the final Volcker Rule conflicts with the Congressional determination under Dodd-Frank , which provides for the permanent grandfathering of Trust Preferred Securities (“TruPS”) issued before May 19, 2010 by certain depository institution holding companies with total consolidated assets of less than $15 billion. The Agencies are therefore evaluating whether it is appropriate not to cover pooling vehicles that invest in TruPS in order to eliminate restrictions that might otherwise have consequences that are inconsistent with the relief Congress intended to provide community banking organizations under Section 171(b)(4)(C) of Dodd-Frank. According to the statement, the Agencies intend to address the question by January 15, 2014.

See: SEC Press Release; Agencies’ Joint Statement
See also:  Trade Associations Request Clarifications Regarding Holding Debt Securities Under New Volcker Rule Regulations


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