The public is invited to weigh in on the advantages and disadvantages of using technology-based compliance systems, among other Volcker issues, as the OCC considers changing the rule.
The U.S. Department of the Treasury’s Office of the Comptroller of the Currency (OCC) is seeking public input on revisions to the implementation of the Volcker Rule, as section 619 of the Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 is commonly known.
Those revisions are generally in the service of the Trump administration’s program of financial and other deregulation.
The OCC also offers an extensive list of possible questions for the public input it is calling for to address. And, not surprisingly, the input the OCC is looking for clearly presumes the benefits of financial deregulation.
The OCC’s list includes the following questions that may be of particular interest to FTF News readers:
- How could the final rule be revised to enable banking entities to incorporate technology-based systems when fulfilling their compliance obligations under the Volcker Rule? Could banking entities implement technology-based compliance systems that allow banking entities and regulators to more objectively evaluate compliance with the final rule?
- What are the advantages and disadvantages of using technology-based
compliance systems when establishing and maintaining reasonably designed compliance programs?
The OCC has posted its solicitation for public input via the Federal Register on “whether certain aspects of the implementing regulation should be revised to better accomplish the purposes of section 619 while decreasing the compliance burden on banking entities and fostering economic growth,” according to a statement from the comptroller’s office.
Specifically, the OCC is looking for “ways to tailor the rule’s requirements and clarify key provisions that define prohibited and permissible activities,” as well as ways that “federal regulatory agencies could implement the existing rule more effectively without revising the regulation.
“The public is invited to provide supporting data that can inform specific changes to the regulation, and help assess the effectiveness of implementation efforts to date,” the OCC adds.
Format for Submissions
Industry participants are allowed to make submissions in the following ways:
- By going to the federal e-rulemaking portal (gov) and entering “Docket ID OCC-2017-0014” in the search box, clicking “search” and then “comment now;”
- By emailing to firstname.lastname@example.org;
- By sending a letter to Legislative and Regulatory Activities Division, Office of the Comptroller of the Currency, 400 7th Street SW., Suite 3E-218, Mail Stop 9W-11, Washington, DC 20219.
- Or by faxing responses to (571) 465-4326.
Top Deregulation Target
“Since its creation, large banks have lamented the Volcker Rule, arguing that it is practically impossible for regulators to discern what type of trading is barred while other activity, such as market-making, remains acceptable,” according to the Reuters news service. “Treasury Secretary Steven Mnuchin has identified the Volcker Rule as one of his top targets in the administration’s efforts to ease private sector regulation.”
With deregulation in mind, the questions address entities subject to the rule, the proprietary trading prohibition, the covered funds prohibition, the metrics reporting requirements, as well as unspecified “additional issues.”
“A bipartisan consensus has emerged that the Volcker Rule needs clarification and recalibration to eliminate burden on banks that do not engage in covered activities and do not present systemic risk,” says Acting Comptroller of the Currency Keith Noreika in a statement. “Public input will help inform our path forward with the views, concerns, and data of those affected by this rule and provides for a more inclusive and transparent process.”
A Sampling of the OCC’s Questions
The questionnaire hits upon many subjects and FTF News is providing a sampling of the questions covered.
On the scope of the Volcker Rule:
- What evidence is there that the scope of the final rule is too broad?
- How could the final rule be revised to appropriately narrow its scope of application and reduce any unnecessary compliance burden?
- What criteria could be used to determine the types of entities or activities that should be excluded?
- How could the rule provide a carve-out from the banking entity definition for certain controlled foreign excluded funds? How could the rule be tailored further to focus on activities with a U.S. nexus?
On the effectiveness of the rule:
- What evidence is there that the proprietary trading prohibition has been effective or ineffective in limiting banking entities’ risk-taking and reducing the likelihood of taxpayer bailouts?
- What evidence is there that the proprietary trading prohibition does or does not have a negative impact on market liquidity?
On exclusions and extensions of the rule:
- What additional activities, if any, should be permitted under the proprietary trading provisions?
- How could the existing exclusions and exemptions from the proprietary trading prohibition — including the requirements for permissible market-making and risk mitigating hedging activities — be streamlined and simplified?
- How could additional guidance or adjusted implementation of the existing proprietary trading provisions help to distinguish more clearly between permissible and impermissible activities?
- Would replacing the current covered fund definition that references sections 3(c)(1) and 3(c)(7) of the Investment Company Act of 1940 with a definition that references characteristics of the fund, such as investment strategy, fee structure, etc., reduce the compliance burden associated with the covered fund provisions? If so, what specific characteristics could be used to narrow the covered fund definition? [Note that the important Investment Company Act of 1940 provisions referenced above also define such terms as “investment company” and “investment securities.”]
On compliance with the rule:
- What evidence is there that the compliance program and metrics reporting requirements have facilitated banking entity compliance with the substantive provisions of the Volcker Rule? What evidence is there that the compliance program and metrics reporting requirements present a disproportionate or undue burden on banking entities?
- How could the final rule be revised to reduce burdens associated with the compliance program and reporting requirements? Responses should include supporting data or other appropriate information.
To view the entire OCC notice, click here.