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OCC Bulletin 2014-27
June 12, 2014
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Chief Executive Officers of All National Banks, Federal Savings Associations, and Federal Branches and Agencies of Foreign Banks; Department and Division Heads, All Examining Personnel; and Other Interested Parties
The Office of the Comptroller of the Currency (OCC) is issuing interim procedures for examiners to assess banks’ progress in developing a framework to comply with requirements of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the implementing regulations adopted by the OCC with the other rule-writing agencies. Section 619, commonly known as the Volcker Rule, prohibits national banks (other than certain limited-purpose trust banks), federal savings associations, and federal branches and agencies of foreign banks (collectively, banks) from engaging in short-term proprietary trading of financial instruments and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds (also known as covered funds).
Because of the Volcker Rule’s complexity, the OCC developed these interim examination procedures to help examiners understand and focus on the rule’s key aspects and to work with banks during the conformance period to measure progress toward achieving compliance by July 21, 2015. The procedures emphasize
The OCC will supplement these procedures during the conformance period with in-depth procedures for examiners to test banks’ compliance on an ongoing basis.
Community banks that do not engage in trading activities covered by the regulations, or make investments subject to the regulations, have no compliance obligations and are not subject to these procedures.
The regulations became effective April 1, 2014, and banks must bring their activities and investments into conformance with the regulations by July 21, 2015.1 Banks with trading assets and liabilities of $50 billion or more on a worldwide consolidated basis (excluding trading assets and liabilities involving U.S. government and agency obligations) must begin collecting quantitative metrics on July 1, 2014, and report these metrics to the OCC on September 2, 2014.2
The regulations’ compliance program requirements vary according to banks’ total consolidated assets.
Banks that do not invest in or sponsor covered funds and limit their proprietary trading to eligible government securities are not required to have compliance programs. If their business plans change, such banks can comply with the regulations by establishing required compliance programs before becoming engaged in covered activities.
Contact Kurt Wilhelm, Director, Financial Markets Group, or Stephanie Boccio, Technical Expert, Asset Management Group, at (202) 649-6360.
John C. Lyons Jr.
Senior Deputy Comptroller and Chief National Bank Examiner
1 On April 7, 2014, the Board of Governors of the Federal Reserve System issued a news release announcing its intent to exercise its authority to give banking entities two additional one-year extensions to conform their ownership interests in, and sponsorship of, certain collateralized loan obligations to meet the requirements of the Volcker Rule. These extensions move the conformance date to July 21, 2017. Only collateralized loan obligations owned as of December 31, 2013, that do not qualify for the exclusion in the final rule for loan securitizations are eligible for the extensions.
2 With respect to federal branches and agencies, the relevant thresholds are based only on the aggregate assets of the U.S. operations of the foreign parent bank.