January 15, 2014 / 10:16 PM / 4 years ago

U.S. bank group drops request for emergency Volcker relief

WASHINGTON, Jan 15 (Reuters) - The American Bankers Association on Wednesday dropped its request for emergency relief from a provision of the Volcker rule after financial regulators eased some of the rule's requirements.

The ABA, one of the largest U.S. banking trade groups, said it was still considering whether to end a lawsuit against the Federal Deposit Insurance Corp and other U.S. agencies over an aspect of the rule that had frustrated small banks.

The Volcker rule bans banks from making speculative bets with their own money and restricts their investments in certain funds. Small banks said it would force them to dump some investments backed by trust-preferred securities, or TruPS, which have hybrid characteristics of debt and equity.

The bank group sued regulators over the dispute. On Tuesday, the agencies tweaked the Volcker rule to allow banks to hold on to certain TruPS-backed investments if they obtained them before the rule was finalized in December.

The ABA said that convinced it to drop the request for emergency relief from the rule but that its members still needed to consider the change before making a decision about the lawsuit.

Several lawmakers praised regulators for coming to a quick decision on the change during a hearing of the House of Representatives Financial Services Committee on Wednesday.

"I appreciate the regulators' responsiveness on this point, and believe their recent interim rule has provided important relief to community banks," said Representative Maxine Waters of California, the committee's top Democrat.

Committee Republicans and banking industry representatives said the narrow fix did not relieve all of their concerns, including about the rule's impact on collateralized loan obligations, or securities formed by pooling business loans.

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