US Agencies Finalize Amendments to Simplify Volcker Rule
US Agencies (CFTC, FDIC, FED, OCC, and SEC) finalized amendments to the regulations implementing section 13 of the Bank Holding Company Act, also known as the Volcker Rule. The Volcker Rule generally prohibits banking entities from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds. The amended rule is intended to provide banking entities with clarity about the activities that are prohibited and to improve supervision and implementation of section 13. The effective date for "amendatory instructions" 1 through 14 (OCC), 16 through 29 (FED), 31 through 44 (FDIC), and 46 through 58 (CFTC) is January 01, 2020 while the effective date for the addition of appendices Z with respect to the amendatory instructions 15 (OCC), 30 (FED), and 45 (FDIC) is January 01, 2020 through December 31, 2020. The effective date for amendatory instructions 60 through 73 (SEC) is January 13, 2020, except for amendatory instruction 74 (SEC), which is effective January 13, 2020 through December 31, 2020. Banking entities must comply with the final amendments by January 01, 2021.
US Agencies (CFTC, FDIC, FED, OCC, and SEC) had published, in July 2018, a proposal to simplify the 2013 rule by providing more certainty for banking entities and tailoring requirements to reflect the size and scope of the trading activities of a banking entity. The agencies received over 75 comments from banking entities and industry groups, public interest groups, and other organizations and individuals. Also, nearly 3,700 comments were received from individuals to express opposition to the proposed rule. The agencies have adopted many of the proposed changes to the 2013 rule, with certain targeted adjustments based on the comments received. The agencies intend to issue an additional notice of proposed rulemaking that would propose additional, specific changes to the restrictions on covered fund investments and activities and to other issues related to the treatment of investment funds under the regulations implementing section 13 of the Bank Holding Company Act.
Similar to the proposal, the final rule includes a risk-based approach to revising the 2013 rule that relies on a set of clearly articulated standards for both prohibited and permitted activities and investments. The final rule includes the same general three-tiered approach to tailoring the compliance program requirements as the proposal. However, based on comments received, the agencies have modified the threshold for banking entities in the “significant” compliance category from USD 10 billion in gross trading assets and liabilities to USD 20 billion in gross trading assets and liabilities. The final rule also includes modifications to the calculation of trading assets and liabilities for determining which compliance tier a banking entity falls into by excluding certain financial instruments that banking entities are permitted to trade without limit under section 13. Additionally, the final rule aligns the methodologies for calculating the “limited” and “significant” compliance thresholds for foreign banking organizations by basing both thresholds on the trading assets and liabilities of the firm’s U.S. operations.
The 2013 rule will remain in effect until the compliance date and a banking entity must continue to comply with the 2013 rule. Alternatively, a banking entity may voluntarily comply, in whole or in part, with the amendments adopted in this release prior to the compliance date, subject to the agencies’ completion of necessary technological changes. The agencies need to complete certain technological programming to accept metrics compliant with the final amendments. The agencies will conduct a test run of the revised metrics submission format with banking entities. A banking entity seeking to switch to the revised metrics prior to January 01, 2021 must first successfully test submission of the revised metrics in the new XML format. Accordingly, banking entities should work with the concerned agency to determine how and when to voluntarily comply with the metrics requirements under the final rules and to notify the agencies of their intent to comply, prior to the January 01, 2021, compliance date.
Related Links
Effective Date: January 01, 2020/January 13, 2020
Keywords: Americas, US, Banking, Securities, Volcker Rule, EGRRCP Act, Dodd-Frank Act, Proportionality, Proprietary Trading, Market Risk, Reporting, US Agencies
Featured Experts

María Cañamero
Skilled market researcher; growth strategist; successful go-to-market campaign developer

Pierre-Etienne Chabanel
Brings expertise in technology and software solutions around banking regulation, whether deployed on-premises or in the cloud.

Nicolas Degruson
Works with financial institutions, regulatory experts, business analysts, product managers, and software engineers to drive regulatory solutions across the globe.
Previous Article
US Agencies Adopt Rule on Appraisals for Real Estate TransactionsRelated Articles
BIS Examines Use of Big Data and Machine Learning at Central Banks
BIS published a paper that provides an overview on the use of big data and machine learning in the central bank community.
APRA Finalizes Reporting Standard for Operational Risk Requirements
APRA finalized the reporting standard ARS 115.0 on capital adequacy with respect to the standardized measurement approach to operational risk for authorized deposit-taking institutions in Australia.
ECB Publishes Guide for Determining Penalties for Regulatory Breaches
ECB published a guide that outlines the principles and methods for calculating the penalties for regulatory breaches of prudential requirements by banks.
MAS Sets Out Good Practices to Manage Operational Risks Amid COVID
MAS and The Association of Banks in Singapore (ABS) jointly issued a paper that sets out good practices for the management of operational and other risks stemming from new work arrangements adopted by financial institutions amid the COVID-19 pandemic.
ACPR Announces New Data Collection Application for Banks and Insurers
ACPR announced that a new data collection application, called DLPP (Datalake for Prudential), for collecting banking and insurance prudential data will go into production on April 12, 2021.
BCB Maintains CCyB at 0%, Initiates First Cycle of Regulatory Sandbox
BCB announced that the Financial Stability Committee decided to maintain the countercyclical capital buffer (CCyB) for Brazil at 0%, at least until the end of 2021.
EIOPA Launches Study on Non-Life Underwriting Risk in Internal Models
EIOPA has launched a European-wide comparative study on non-life underwriting risk in internal models, also kicking-off of the data collection phase.
SRB Publishes Overview of Resolution Tools Available in Banking Union
SRB published an overview of the resolution tools available in the Banking Union and their impact on a bank’s ability to maintain continuity of access to financial market infrastructure services in resolution.
EBA Consults on Pillar 3 Disclosure Standards for ESG Risks Under CRR
EBA is consulting on the implementing technical standards for Pillar 3 disclosures on environmental, social, and governance (ESG) risks, as set out in requirements under Article 449a of the Capital Requirements Regulation (CRR).
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting
ESAs Issue Advice on KPIs on Sustainability for Nonfinancial Reporting