Securities Regulation Daily House votes to give Fed exclusive Volcker Rule authority, exempt community banks
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Friday, April 13, 2018

House votes to give Fed exclusive Volcker Rule authority, exempt community banks

By Lene Powell, J.D.

By a vote of 300-104, the U.S. House of Representatives voted to pass the Volcker Rule Regulatory Harmonization Act (H.R. 4790). The bill would grant exclusive rulemaking authority under the Volcker Rule to the Federal Reserve Board and would exclude banks under certain asset thresholds from the Rule.

Exclusive authority for the Fed. The Volcker Rule was added to the Bank Holding Company Act of 1956 by Section 619 of the Dodd-Frank Act. It places certain limits on financial institutions’ proprietary trading and relationships with hedge funds and private equity firms. Currently, the federal banking and market regulatory agencies share rulemaking authority under the rule (the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the SEC, and the CFTC).

Upon enactment, the Federal Reserve Board would have exclusive authority to issue and amend rules under Section 13(b) of the Bank Holding Company Act of 1956. The bill further provides:

  • Any rule or guidance issued under Section 13(b) before enactment would remain in effect until the Board issued a successor rule or guidance, or amended the rule or guidance;
  • In performing examinations and supervisory duties, the Federal banking agencies, the SEC, and the CFTC would be required to update any applicable policies or procedures to conform them to the Board’s new exclusive authority;
  • In adopting a rule or guidance under Section 13(b), the Board would be required to assure consistent application and implementation.

House Financial Services Committee Chairman Jeb Hensarling (R-Texas) said that having five different regulators interpreting and enforcing the rule can create conflicts and confusion for regulated entities.

"You cannot have an economy based on the rule of law when, frankly, you don’t know what the law says. And so, the gentleman from Arkansas brings a very simple bill to the House floor that says we’re going to have one regulator in charge of interpreting the rules, and the primary prudential regulator is going to be in charge of enforcing the rule," said Hensarling.

Community banks exclusion. The bill amends Section 13(h)(1) of the Bank Holding Company Act to exempt from the Volcker Rule banks with total assets: (1) of $10 billion or less; and (2) comprised of 5 percent or less of trading assets and liabilities.

The bill also makes conforming amendments.

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