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January 3, 2014

Banks Near Victory in Fight Over Volcker Rule Provision

Regulators are hoping to release an interim final rule next week designed to satisfy banker demands to change a provision of the Volcker Rule that threatens to force smaller institutions to take millions of dollars in write-offs.

While the situation is fluid and the exact form of relief could change, regulators are considering exempting all existing collateralized debt obligations backed by trust-preferred securities from compliance with the Volcker Rule, say people with the knowledge of the deliberations. Such a move would likely stem the banker anger that erupted after regulators said such CDOs were covered by the controversial regulation, and may spur the American Bankers Association to drop its lawsuit over the issue.

Observers called this a savvy solution, allowing regulators to preserve the Volcker Rule’s treatment of such CDOs from now on while avoiding the market fallout that would result from changing the accounting treatment for existing Trups-backed obligations.”

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Read full American Banker article here

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