WASHINGTON Feb 12 A group that represents
banks' interests dropped its lawsuit against U.S. financial
regulators over a proprietary trading ban known as the Volcker
rule, the group's chief executive said on Wednesday.
"We believe the best opportunity to pursue successful
resolution of these issues is to constructively engage with the
regulators without the chilling impediment of pending
litigation," Frank Keating, head of the American Bankers
Association, said in a statement.
The Volcker rule bans banks from making risky trades with
their own money and limits investments in certain funds. It was
required by the 2010 Dodd-Frank law and written by the Federal
Reserve, Securities and Exchange Commission and other agencies.
When the rule was finalized in December, small banks
complained that it would force them to dump investments in
trust-preferred securities, or TruPS, which have hybrid
characteristics of debt and equity.
The banks claimed it was an unintended consequence of the
rule that would cost them money. The bankers' association sued
the regulatory agencies that wrote the rule over the dispute.
Regulators responded in January by tweaking the rule to
allow firms to hang onto certain TruPS-backed investments if the
banks purchased them before the Volcker rule was finalized.
At the time, the bank group said it appreciated the changes
but needed to consult its members before dropping the lawsuit.
Keating said the group still believes the Volcker rule will
be costly for small banks, but added that regulators appeared
willing to address unanticipated problems with the rule.