CBA Joins ABA in Call to Address Volcker Rule Provision Related to Trust Preferred Securities

General information

CBA has joined the American Bankers Association to urge federal regulators to address the unintended consequences of the recently finalized regulations implementing the Volcker Rule with respect to the treatment of investments by banks in Trust Preferred Securities (TruPS).

The CBA, is a signatory to the letter authored by the ABA, to Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation Chairman Martin Gruenberg and Comptroller of the Currency Thomas Curry, urging swift action to address to this important issue.

Under the rules approved last week, collateralized debt obligations that are backed by TruPs are considered “covered funds” subject to the Volcker Rule’s restrictions. The resulting accounting treatment will cause banks of all sizes that use TruPs to support these debt obligations to face significant capital charges.

Even though the provisions of the regulations are scheduled to go into effect in 2015, accounting practices triggered by the implementing regulations could subject many banks to imminent financial losses.