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Big bank regulations loosened
The Federal Reserve announced this week that an interagency rule to loosen Volcker rule requirements on big banks has been finalized. NAFCU had urged the agencies to withdraw their proposed rulemaking, arguing that relaxing the requirements could undermine financial stability.
The Federal Reserve was the last of the regulators to approve it; the FDIC, Office of the Comptroller of the Currency, Commodity Futures Trading Commission, and Securities and Exchange Commission previously voted to approve it.
Federal Reserve Governor Lael Brainard, with whom NAFCU has previously met, was the only Fed member to vote against the changes. Brainard expressed concerns that the rule "weakens the core protections against speculative trading within the banking federal safety net."
The Volcker rule was put in place after the 2008 financial crisis to prevent improper, speculative trading. The final rule clarifies requirements related to bank relationships with covered funds and relaxes certain limits on proprietary trading, which is generally short-term and bears additional risk. It is revised from the proposal, but the changes dropped a bank-opposed provision that would have tied compliance with the rule to an accounting standard.
The changes become effective Jan. 1, 2020, with a compliance date of Jan. 1, 2021.
NAFCU has vocalized its concerns about reducing oversight of banks that are still too big to fail. In July, the five banking regulators confirmed NAFCU's interpretation of a provision in the Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) with a final rule that clarifies the Volcker rule relief provided in the provision applies only to community banks. The association has also called on Congress to consider enacting a modernized Glass-Steagall Act.
The association is supportive of reform efforts that allow credit unions and other financial institutions to compete without putting consumers at risk. However, NAFCU consistently works to set the record straight on the differences between credit unions and banks as the banking industry continues to lobby to have their requirements relaxed while trying to put the requirements on credit unions.
NAFCU will continue to work with the Federal Reserve to ensure credit unions' concerns are heard. Later this year, NAFCU and its Board of Directors will meet with Federal Reserve Governor Michelle Bowman to share insights from the association's Annual Report on Credit Unions.