Magazine article American Banker

ABA to Sue Regulators over Volcker Rule

Magazine article American Banker

ABA to Sue Regulators over Volcker Rule

Article excerpt

Byline: Rob Blackwell

WASHINGTON -- The American Bankers Association plans to challenge the Volcker Rule in court unless regulators immediately suspend portions of the controversial regulation that restrict certain collateralized debt obligations of trust-preferred securities.

In a letter to regulators, the trade group said the financial harm from the provision is "real, imminent and irreparable."

"If the rule is not suspended, we will shortly file a lawsuit challenging the rule... and seeking emergency relief," said Frank Keating, the president and chief executive of the ABA. "In light of the short time frame banking entities have to evaluate the status of their investments, make decisions regarding valuations and reach agreement with their accountants, we request, in the interest of fairness, that you issue a stay of these provisions, and that you keep this stay in effect until these issues are resolved, either through further dialogue or, if necessary, by the courts."

At issue is whether banks are required to shed CDOs that are made up of trust-preferred holdings and how quickly. Under the final Volcker Rule issued two weeks ago, regulators said that certain CDOs that relied on a particular legal exemption from investment registration might be restricted.

As a result, at least three banks said they would have to write down or sell such assets immediately, potentially at a substantial loss, despite the fact that the Volcker Rule does not go into effect until July 2015. …

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