January 14, 2014
Federal banking regulators have responded to industry calls to rectify a Volcker Rule provision requiring banks to divest by July 2015 their holdings of collateralized debt obligations (CDOs) backed by trust-preferred securities (TruPS). The interim final rule permits banks to retain TruPS CDOs they owned as of December 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. The rule will avoid the dramatic market impact of revised accounting treatment and forced divestiture of these securities.
The Independent Community Bankers of America (ICBA) worked with the various banking regulators and members of Congress to exempt these instruments from the Volcker Rule. CBAI and ICBA are reviewing the interim final rule to assess its impact and will weigh options for pursuing additional relief measures as necessary.