U.S. regulators working to address small banks' Volcker concerns

WASHINGTON Wed Dec 18, 2013 2:03pm EST

WASHINGTON Dec 18 (Reuters) - U.S. regulators are working on ways to address some concerns from small and medium-sized banks about the Volcker rule after it was finalized last week.

The American Bankers Association, an industry lobby group, sent a letter on Tuesday to the agencies behind the proprietary trading ban, saying the rules could have unintended negative consequences for banks with investments in trust preferred securities.

The trade group asked the Federal Reserve, Federal Deposit Insurance Corp and Office of the Comptroller of the Currency to address the conflict, which it said could cause "unexpected hits to earnings and even to capital" at some banks.

The agencies are working to provide clarity that could alleviate those concerns, a source familiar with the issue said. The clarifications likely would not involve changes to the final rules.

Regulators approved the final version of the Volcker rule, a requirement of the 2010 Dodd-Frank Wall Street oversight law, on Dec. 10 after years of work. The rules restrict banks' ability to trade with their own money and limit their investments in certain types of funds.

The rules do not officially take effect until 2015, but the bankers association said accounting rules mean banks would likely face losses sooner.

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