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Bankers Say Clarification of CDOs Under Volcker Falls Short
By Jesse Hamilton and Cheyenne Hopkins
December 20, 2013
U.S. banking regulators provided advice on how banks should treat certain securities in a document quickly panned by industry groups for failing to address their concerns that the newly finalized Volcker Rule will force banks to take losses on the securities.
Banking groups had pressed regulators to make clear how smaller banks should account for collateralized debt obligations backed by trust-preferred securities, which were included among investments limited in the Volcker Rule’s ban of certain risky bank trades. The institutions have been preparing for potential writedowns of the holdings under the rule.
“It makes you wonder, why did they go to the trouble to issue it, because there’s really nothing there,” Wayne Abernathy, an executive vice president at the American Bankers Association, said after the regulators issued their advice yesterday. “It’s not answering the issues that have been raised.”
The document released by the banking agencies was in the form of answers to frequently asked questions, and it explained that banks don’t have to immediately sell the securities under the rule and can try to adjust aspects of the holdings until they’re no longer affected.
The banking groups’ reaction is a “disingenuous” complaint that regulators are doing their jobs, said Mark Williams, a former Federal Reserve bank examiner who is a lecturer at Boston University’s School of Management.
Read the full article at: Bloomberg.com