In this week’s roundup, we look at the steps taken by the Federal Reserve Board toward easing the Volcker Rule. Meanwhile, the United States enacted tariffs that will affect countries participating in NAFTA negotiations, and it announced planned tariffs on China.
Regulators Take First Step in Easing Volcker Rule Requirement
The Federal Reserve Board on Wednesday voted unanimously to advance a proposed rule to “simplify and tailor compliance requirements” under the Volcker Rule. The Volcker Rule, a cornerstone of the stricter banking regulations passed in the wake of the 2008 financial crisis, is intended to prevent banking entities from making various types of speculative investments that do not benefit their customers.
The notice of proposed rulemaking, or NPR, follows on the heels of last week’s passage of the bipartisan banking deregulation bill. Although the new banking law offers some reprieve from the Volcker Rule, the law’s changes are focused specifically on community banks. They apply only to banks with less than $10 billion in total assets and less than 5 percent of total consolidated assets in trading assets and liabilities.
The day after the Fed voted on the NPR, the FDIC and OCC followed suit. Approval by the other two regulators is expected soon.
The NPR supplements the recent legislation by putting forth a comprehensive set of proposals with the goal of streamlining the notoriously complex rule and reducing ill-fitting regulatory burdens overall.
What’s in the NPR
The proposed rule, summarized for the Federal Reserve Board of Governors in a memo, includes provisions that would:
- Tailor requirements of the Volcker Rule based on the size of banks’ trading assets and liabilities.
- Revise and clarify definitions of terms relevant to proprietary trading activities and tailor the criteria that allow a banking entity to seek exemption from the proprietary trading prohibition.
- Clarify the definition of “covered funds,” including whether certain categories of funds—hedge, private equity or venture capital—should be excluded from the definition.
- Amend the CEO attestation requirement and tailor compliance programs.
Given that rulemaking authority under the Volcker Rule is shared among five regulators (the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission), all five agencies must vote to advance the joint proposal. The day after the Fed voted on the NPR, the FDIC and OCC followed suit. Approval by the other two regulators is expected soon.
Once all five regulators approve the NPR, it will be published in the Federal Register where interested parties will have 60 days to submit comments. Although this rulemaking cannot change statutory requirements, it offers an important opportunity to advocate for much-needed clarifications and the reduction of unnecessary burdens associated with implementation of the Volcker Rule.
ACG is actively analyzing the proposed rule and will continue to provide updates throughout the rulemaking process.
U.S. Enacts Tariffs on EU, Canada, and Mexico, Announces Plans for China
U.S. Commerce Secretary Wilbur Ross told reporters that tariffs will be enacted starting Friday, June 1, on steel and aluminum from the three countries with which the United States is currently engaged in NAFTA negotiations, Reuters reports. Designed to increase production in the U.S. steel and aluminum industries, the tariffs are in the process of being challenged in the World Trade Organization, and responses from the countries are already being announced.
On Tuesday morning, Axios reported that the White House has announced a plan to enact tariffs of 25 percent on $50 billion of Chinese tech goods. The White House will also pursue WTO litigation surrounding intellectual property abuses and limit the ability of Chinese entities and nationals to invest in U.S. companies.
Maria Wolvin is ACG Global’s vice president and senior counsel, public policy.
Ben Marsico is ACG Global’s manager of legislative and regulatory affairs.