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Washington Wrap — Regulators in lockstep on Volcker rule reform

The Washington Wrap is a weekly look at regulation, news and chatter from the Capitol. Send tips and ideas to brian.cheung@spglobal.com and polo.rocha@spglobal.com.

At the regulators

Five regulatory agencies on May 30 released a long-awaited framework for reforming the Volcker rule, a Dodd-Frank regulation requiring restrictions on proprietary trading. The proposal would eliminate the "rebuttable presumption" standard that currently blocks banks from financial positions held for fewer than 60 days. The agencies are also asking for public comment on how they should treat business relationships with hedge funds and private equity firms.

The Federal Reserve, the Federal Deposit Insurance Corp. and Comptroller of the Currency Joseph Otting have all approved the rule. The two remaining regulators — the Commodity Futures Trading Commission and the Securities and Exchange Commission — are scheduled to discuss the rule June 4 and June 5, respectively.

Obama-appointed bank regulators also expressed support for the changes. Fed Governor Lael Brainard, who disapproved of a proposal to dial back the enhanced supplementary leverage ratio, said the changes would make regulatory oversight more efficient while maintaining key controls like CEO attestation, which requires a bank's CEO to sign off on Volcker compliance programs.

Outgoing FDIC Chairman Martin Gruenberg said the changes "preserve the core principles" of the Volcker rule, similarly saying that the rule still gives agencies "robust" discretion to examine compliance with the rule.

Even former Fed Chair Paul Volcker himself welcomed "simplification" efforts.

The proposal marks the first steps in reforming the rule. In addition to statutory changes from the recently passed bill providing Volcker rule exemptions, regulators could pursue further rulemaking in the future after soliciting public comments in this first round of rulemaking.


The FDIC and the OCC also approved a final rule regarding securities transaction settlement cycles. The rule complies with an SEC mandate shifting the industry standard for settling securities transactions from three days, or "T+3," to two days, or "T+2." The rulemaking aligns settlement cycle requirements with the Fed.

At the CFPB

Acting CFPB Director Mick Mulvaney informed agency staff May 31 that he has lifted a freeze on the collection of personal data. Mulvaney had stopped data collection when he assumed leadership of the agency in November 2017, fearing that the Bureau did not have the proper cybersecurity framework in place to protect that information.

In an email, Mulvaney said the agency had completed an "exhaustive review" which included internal tests to hack the agency's own systems. Mulvaney said the CFPB systems appear to be well-secured.

The House Financial Services Committee will address CFPB operations in a hearing June 6.

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