Open Board Meeting May 30, 2018 | Summary and Q&A

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May 30, 2018
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Federal Reserve
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Open Board Meeting May 30, 2018

TL;DR

The Federal Reserve is proposing revisions to the Volcker Rule, which aims to limit proprietary trading by federally insured commercial banks. The proposed changes would simplify and tailor the rule to ease compliance burden for firms, especially those with limited trading activities.

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Key Insights

  • 🦺 The proposed revisions to the Volcker Rule focus on simplifying and tailoring regulations to improve compliance without sacrificing safety and soundness.
  • 👻 The changes aim to provide clearer guidelines on permissible activities, allowing banks to operate more efficiently while still adhering to the rule.
  • ❓ The proposal focuses compliance requirements on banking entities with significant trading activities, reducing burden on firms with limited trading activities.

Transcript

Good afternoon. I'd like to welcome our guests listening online as well as everyone who has joined us here today at the Federal Reserve. Enacted as part of the Dodd-Frank Act, the Volcker Rule says that proprietary trading is generally not an appropriate line of business for a federally insured commercial bank. The joint agency proposal before us t... Read More

Questions & Answers

Q: How would the proposed changes affect large banks with extensive trading activities?

The proposed changes would clarify permissible and prohibited activities for trading desks at large banks with more than $10 billion in trading assets. While the rule does not restructure their trading operations, it aims to provide greater clarity and flexibility while maintaining compliance requirements.

Q: How will the proposal affect underwriting and market-making activities?

The proposal allows banks to set their own position limits for underwriting and market-making activities, providing flexibility and reducing prescriptive requirements. However, the agencies will review these limits to ensure they are consistent with the statute.

Q: How will compliance requirements be tailored for different banking entities?

The proposal seeks to reduce compliance requirements for banking entities with moderate or limited trading activities, while maintaining more stringent requirements for those with significant trading activities. Banking entities with limited trading activities would have a presumption of compliance, reducing the burden of demonstrating ongoing compliance.

Q: How will the proposed changes affect reporting and metrics collection?

The proposal aims to streamline metrics reporting by eliminating certain metrics and extending reporting deadlines for banking entities with significant trading activities. Metrics reporting requirements would apply only to firms with significant trading activity, reducing compliance burdens.

Summary & Key Takeaways

  • The proposed changes aim to simplify and improve the Volcker Rule, which restricts proprietary trading by federally insured commercial banks.

  • The revisions would tailor the rule based on a banking entity's trading activities, with three categories established based on trading assets and liabilities.

  • Firms with significant trading activities would face the most stringent compliance requirements, while those with limited trading activities would benefit from a presumption of compliance.

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