December 23, 2013
Illinois Senator Mark Kirk and Congressmen Peter Roskam, Randy Hultgren, and Bill Foster, have called on federal banking regulators to address the impact of certain provisions of the Volcker Rule that could create severe unintended consequences for hundreds of community banks. The provisions which were recently released could require many community banks to take unanticipated losses on their holdings of collateralized debt obligations (CDOs) backed by bank-issued trust preferred securities (TruPS).
Senator Mark Kirk (R-IL) joined with Senator Joe Manchin (D-W.VA) in stating, “The purpose of the Volcker Rule was to ensure that the trading activities of the big banks do not undermine the U.S. economy and financial stability, not to punish community banks.” They went on to explain that under the Rule, “These [community] banks would be required to recognize a write-off in the current quarter for any unrealized losses from holding these securities and would be required to liquidate the security by July of 2015. If the bank was able to hold these securities until maturity, the anticipated loss would be zero.” Kirk and Manchin urged the regulators to use their authority to grant a carve-out or grandfather status to banks under a certain asset size for their ownership of these securities.
Congressman Randy Hultgren (R-14) and Bill Foster (D-11), both members of the House Financial Services Committee, expressed their deep concern for the immediate consequences of the Volcker Rule on Illinois community banks which hold these securities. Chief Deputy Whip Peter Roskam (R-6) urged that, in the interests of Illinois community financial institutions, the regulators consider potential accommodations and alternatives. He also noted that, given the time sensitive nature of this issue, regulators should give consideration to this matter as soon as possible.
CBAI thanks Senator Kirk, and Congressmen Hultgren, Foster, and Roskam for writing the banking regulators on this important issue, and for their support for Illinois community banks.