Attention Banks: Five Crucial Deadlines for Q2

March 26th, 2014

After years of planning and discussion, many of the financial regulations that resulted from the 2008 financial crisis — specifically, FATCA and elements of Dodd-Frank, such as the Volcker Rule — are finally coming into effect.

Here are some important dates that financial institutions need to keep in mind over the next few months.

April 1, 2014 — Effective date of the final interagency rule implementing the Volcker Rule.

The still-debated Volcker Rule, which prohibits Banking Entities from engaging in most proprietary trading and from acquiring or retaining an interest in Covered Funds, goes into effect on April 1. While the majority of Banking Entities will not need to comply until 2015, entities with trading assets and liabilities in excess of 50 billion dollars will need to start reporting on June 30, 2014.

Not surprisingly, the majority of the costs associated with compliance will be shouldered by the largest banks. The Office of the Comptroller of Currency estimatesthat costs — including those associated with impact to market value of covered funds, compliance, reporting and increased supervision — could reach as high as $4.5 billion. This estimate further supports claims by certain lawmakers, the U.S. Chamber of Commerce and others that U.S. regulators should have conducted an economic impact analysis of the regulations prior to implementation.

Despite allegations that regulators failed to meet their duties under federal laws such as the Unfunded Mandates Reform Act, only one legal challenge to the Volcker Rule has been filed. The suit by the American Bankers Association was driven by the fear that an earlier version of the rule would have a significant and unintended impact on community banks due to the prohibition on ownership of collateralized debt obligations (“CDO”). The suit was dropped when regulators amended the rule to exempt most bank investments in CDOs backed by trust preferred securities (“TruPS”) from the Volker Rule’s investment prohibitions.

Read the full article here.