Bank Regulatory News And Trends - 23 September 2019

This regular publication from DLA Piper focuses on helping banking and financial services clients navigate the ever-changing federal regulatory landscape.

CFTC approves Volcker rule overhaul. Another one of the five agencies charged with oversight of the Volcker Rule restrictions on proprietary trading by banks has given its approval to the finalized modifications to the Dodd-Frank-mandated rule. At its September 16 commissioners' meeting, the CFTC agreed to support the rule changes in a 3-2 vote that broke down along party lines, with both Democratic commissioners voting no. As reported in the August 26 edition of Bank Regulatory News and Trends, the FDIC and the OCC have approved the new Volcker provisions. The Fed and the SEC have yet to act. CFTC Chairman Heath P. Tarbert called the Volcker rule "among the most well-intentioned but poorly designed regulations in the history of American finance" and said the amended version would "tailor the Volcker Rule to increase efficiency, right-size firms' compliance obligations and allow banking entities - especially smaller ones - to provide services to clients more efficiently." But Commissioner Dan Berkovitz said the revisions "will render enforcement of the rule difficult if not impossible by leaving implementation of significant requirements to the discretion of the banking entities, creating presumptions of compliance that would be nearly impossible to overcome and eliminating numerous reporting requirements."

Volcker dissents. Count former Federal Reserve Chairman Paul Volcker, for whom the rule is named, among those who oppose the changes. In an August 20 letter to current Fed Chairman Jerome Powell, Volcker wrote, "The new rule substantially narrows the proprietary trading prohibition, enabling banks to speculate freely for their own profit with financial instruments previously under the Volcker Rule's constraints," adding that the changes "appear far afield from the regulators' stated objective of mere simplification." In a September 5 response letter, Powell wrote that, while he supports the underlying principle of the rule, "It has been quite challenging to execute this sensible idea within the statutory framework." The letters were obtained by Politico. CFPB issues no-action letter, sandbox and trial disclosure policies. The CFPB on September 10 issued its final guidance on three policies intended promote innovation by giving financial firms more opportunities and compliance flexibility to try new technologies, practices and methods. CFPB's new No-Action Letter (NAL) Policy will provide more certainty that the Bureau will not bring a supervisory or enforcement action against a company for providing a product or service under certain criteria and a streamlined review process focusing on the consumer benefits and risks of that product or service. The finalized Compliance Assistance Sandbox (CAS) Policy will evaluate a product or service for compliance with relevant laws and will offer approved applicants a...