Bank regulators last week approved the final Volcker rule, which restricts banks’ ability to make bets with their own money and limits their investments in certain funds. Lobby groups and some lawmakers have since called on regulators to address what they called an unintended consequence. Small and mid-sized banks said that even though the rules do not officially take effect until 2015, accounting rules meant they could face losses sooner.
The Federal Reserve, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency said banks ”are not required to sell these holdings immediately under the final rules.” Instead, they said, banks can use the full compliance period to decide if their investments are allowed. At issue are so-called trust-preferred securities, which have characteristics in common with both shares and debt investments. Banks worried their holdings might run afoul of the Volcker rule.
The regulatory agencies said banks should look at whether their holdings can be restructured and at the extent of their investments before deciding whether to sell.