Simplifying Compliance With the “Volcker Rule” for Banks (H.R. 4790)

What is H.R. 4790?

(Updated July 31, 2018)

This bill would aim to streamline banks’ compliance with the Volcker Rule by giving the Federal Reserve’s Board of Governors exclusive rulemaking authority and exempting community banks with less than $10 billion in assets and trading liabilities less than 5 percent of total assets. A bank’s primary regulator would have sole authority for examinations and enforcement. The Volcker Rule restricts financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) from owning or sponsoring hedge funds and private equity funds. Under current law, rulemaking regarding the Volcker is shared among several regulatory institutions, including the Fed’s Board of Governors.

Argument in favor

This bill would streamline the regulatory rulemaking and enforcement process for the Volcker Rule by centralizing the rulemaking process with the Federal Reserve and oversight with banking agencies. It would ease the burden on local banks and expand access to capital.

Argument opposed

Regulations related to the Volcker Rule should continue to be drafted and overseen by multiple agencies, rather than centralized with the Federal Reserve and specific regulators. It would undermine the Volcker Rule’s effectiveness at preventing excessive speculative activities.

Impact

Community banks and banks subject to the Volcker Rule; and financial regulators, particularly the Federal Reserve.

Cost of H.R. 4790

The CBO estimates that enacting this bill would not significantly impact the federal budget or the deficit.

Additional Info

In-Depth: Sponsoring Rep. French Hill (R-AR) introduced this bill to improve coordination among the federal banking regulatory agencies as it relates to the Volcker Rule:

“As a former community banker, I have dealt with the confusion associated with regulatory inconsistencies across the federal banking agencies, the Volcker Rule having become one of the most indecipherable. Given the Rule has over 270 federal register pages and names four different agencies as regulatory authorities, my bill attempts to streamline the regulatory rulemaking and enforcement process. This simple clarification will not only ease the regulatory burden for our local banks, it will enhance capital formation and financing options.”

Some House Democrats expressed opposition to this bill writing in its committee report:

“H.R. 4790 is the latest attempt to weaken the Volcker Rule, a cornerstone of Wall Street reform enacted in the wake of the financial crisis that prohibits taxpayer-backed banks from risky proprietary trading and from owning hedge and private equity funds. The bill would create a dangerous loophole by providing a blanket exemption from the Volcker Rule for banks with consolidated assets of $10 billion or less and with less than 5% of those assets in trading assets. The bill would also delegate sole rulemaking authority on the Volcker Rule to the Federal Reserve, inappropriately and unnecessarily taking away the jurisdiction of the FDIC, OCC, SEC, and CFTC and making it easier for the Trump administration to weaken or repeal the rules.”

This bill passed the House Financial Services Committee on a 50-10 vote and has the support of three bipartisan cosponsors, including two Democrats and one Republican.

Media:

• Sponsoring Rep. French Hill (R-AR) Press Release
  
• CBO Cost Estimate
  
• Financial Regulation News