General information

Federal Agencies Conform Volcker Rule Treatment of TruPS with Collins Amendment
February 10, 2014

The banking and securities regulators exhibited an unusual degree of efficiency when they issued an interim final rule under the Volcker Rule exempting from “covered funds” most collateralized debt securities backed by trust preferred securities or “TruPS.”

TruPS used by bank holding companies of smaller banks were grandfathered under Section 171 of the Dodd-Frank Act, which generally required the phasing out of TruPS as tier 1 capital. In their final regulation to the Volcker Rule issued last December, the agencies ignored the grandfather clause and would prohibit all banks from investing in covered funds, which is broadly defined to include TruPS. Banks complained and the American Bankers Association sued, citing the inconsistency. A month later, the agencies responded with an interim final rule exemption TruPS under certain conditions.

See CBA’s Regulatory Compliance Bulletin for more information.