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Volcker Rule Regulations Are Amended Before They’re Published

January 14, 2014

Even before the regulations implementing the Volcker rule could be published in the Federal Register, they have been amended. Today, the Federal Reserve Board, FDIC, OCC, CFTC, and SEC approved an interim final rule permitting banks to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (“TruPS CDOs”) from the investment prohibitions of Section 619 of the Dodd-Frank Act, known as the Volcker rule.

The agencies will permit banking entities to retain an interest in or sponsorship of covered funds if: 


  • The TruPS CDO was established, and the interest was issued, before May 19, 2010;
  • The banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral; and
  • The banking entity’s interest in the TruPS CDO was acquired on or before December 10, 2013, the date the agencies issued final rules implementing the Volcker rule.

The interim final rule defines Qualifying TruPS Collateral as any trust preferred security or subordinated debt instrument that was:

  • Issued prior to May 19, 2010, by a depository institution holding company that as of the end of any reporting period within 12 months immediately preceding the issuance of such trust preferred security or subordinated debt instrument had total consolidated assets of less than $15 billion; or
  • Issued prior to May 19, 2010, by a mutual holding company.

The interim final rule also provides that the relief relating to these TruPS CDOs extends to activities of the banking entity as a sponsor or trustee for these securitizations and that banking entities may continue to act as market makers in TruPS CDOs.

The Federal Reserve Board, FDIC, and OCC also released a non-exclusive list of issuers that meet the requirements of the interim final rule.

Comments on the interim final rule should be submitted within 30 days after publication in the Federal Register, which is expected shortly.

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