The Clearing House Offers Recommendations for Volcker Rule Reform

The Clearing House Offers Recommendations for Volcker Rule Reform


Washington, DC – September 22, 2017 – In a comment letter filed late yesterday with the Office of the Comptroller of the Currency, The Clearing House (TCH) made recommendations regarding how to more effectively implement the Volcker Rule to better promote lending, banking services, and vibrant capital markets while still ensuring it meets its objective of reducing risk and enhancing bank safety and soundness by restricting excessive risk-taking activities by banks and their affiliates.  TCH’s letter focuses on how the existing regulatory framework implementing the Volcker Rule has unnecessarily restricted the ability of banks to conduct certain traditional commercial banking businesses clearly outside the intended scope of the Volcker Rule.

“Modifying some of the overbroad definitions in the Volcker Rule would substantially simplify both implementation of, and compliance with the rule, without undermining its policy objectives of reducing risk and enhancing bank safety and soundness,” said Gregg Rozansky, Managing Director and Senior Associate General Counsel at The Clearing House.  “Our recommended modifications are wholly consistent—indeed, more consistent than the Final Rule itself—with the text and spirit of the statute which seeks to ban speculative proprietary trading and excessive risk taking.”

As the letter highlights, a fundamental problem with the existing Volcker Rule is that a broad array of banking and risk-management activities that fall within the parameters of two key definitions included the rule — “trading account” and “covered fund”.  As a consequence of the sweeping nature of these definitions, a wide range of banking, trading and funds-related activities — not only speculative or excessive risk-taking activities that the statute was intended to target – are either prohibited or presumed to be prohibited unless proven otherwise.

The comment letter includes an Annex describing several examples of the types of risk-management and core commercial banking activities either restricted or burdened by the Volcker Rule regulations.  These include activities such as managing a wide range of risks, lending and providing capital to businesses, providing custodial services to institutions, and asset management.

About The Clearing House.  The Clearing House is a banking association and payments company that is owned by the largest commercial banks and dates back to 1853.  The Clearing House Payments Company L.L.C. owns and operates core payments system infrastructure in the United States and is currently working to modernize that infrastructure by building a new, ubiquitous, real-time payment system.  The Payments Company is the only private-sector ACH and wire operator in the United States, clearing and settling nearly $2 trillion in U.S. dollar payments each day, representing half of all commercial ACH and wire volume.  Its affiliate, The Clearing House Association L.L.C., is a nonpartisan organization that engages in research, analysis, advocacy and litigation focused on financial regulation that supports a safe, sound and competitive banking system.