“In the opening salvo against a new rule banning proprietary trading, the banking industry is refighting an old battle.

“Since the 2008 financial crisis, regulators and Congress have made clear they no longer like so-called trust-preferred securities, or TruPS, and banks have struggled with how and when to get them off their books.

“Now the issue is rearing its head in the first legal challenge to the Volcker Rule, which is again putting a focus on securities that regulators once blessed and then scorned.

“’It is another aggressive attempt by the regulators to address this issue, and they were not prepared for the fallout and backlash that they were going to get,’ said Paul Merski, the executive vice president for congressional relations at the Independent Community Bankers of America.

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“Supporters of the proprietary trading ban argue the losses are not big when spread across all the banks, particularly when Zions Bank, which has about $55 billion in assets, would most likely eat up a lot of that number. The bank said last month that it expects the provision to lead to an after tax charge of $387 million for reclassifying its CDOs as available for sale. According to SNL Financial, Wells Fargo and Citigroup are also top holders of TruPS.

“’This is a teeny, weeny issue,’ said Dennis Kelleher, president of financial reform advocacy group Better Markets. ‘It looks to me like it’s just an excuse to bash the Volcker Rule and an excuse to pretend big banks are community banks.'”

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