Capital Thinking: Financial Services


Legislative Activity

Congress Releases Volcker Fix Bills

House Financial Services Chairman Jeb Hensarling (R-TX), Representative Shelley Moore Capito, and four other House Republicans introduced the “Fairness for Community Job Creators Act” (H.R. 3819) last week, to exempt all banks, regardless of size, from divesting collateralized debt obligations (CDOs) backed by trust preferred securities (TruPS) under the newly finalized Volcker rule. The introduction of this bill follows a letter sent by twenty-two House Democrats to regulators asking for an exemption.

On the Senate side, Senate Banking Committee Ranking Member Mike Crapo (R-ID), Senator Mark Kirk (R-IL) and five other Republican Senators introduced a bill similar to H.R. 3819, adding an exemption for collateralized loan obligations (CLOs). Additionally, Senator Joe Manchin (D-WV) introduced a bill exempting banks with less than $50 billion in assets from divesting CDOs backed by TruPS under the Volcker rule.

This Week’s Hearings:

  • Tuesday, January 14: The House Financial Services Subcommittee on Financial Institutions and Consumer Credit will hold a hearing titled, “How Prospective and Current Homeowners Will Be Harmed by the CFPB’s Qualified Mortgage Rule.”
  • Wednesday, January 15: The Senate Banking Subcommittee on Financial Institutions and Consumer Protection will hold a hearing titled, “Regulating Financial Holding Companies and Physical Commodities.” The hearing will examine the warehousing practices by large banks and possible commodity price manipulation caused by those practices.
  • Wednesday, January 15: The Senate Finance Committee will hold a hearing to consider the pending nominations before it. One of the nominations to be considered is Mr. R. Gil Kerlikowske to be Commissioner of Customs for the Department of Homeland Security.
  • Wednesday, January 15: The House Financial Services Committee will hold a hearing titled, “The Impact of the Volcker Rule on Job Creators, Part I.”
  • Thursday, January 16: The House Small Business Subcommittee on Investigations, Oversight, and Regulations will hold a hearing on the Securities and Exchange Commissions (SEC) crowdfunding proposal. The hearing will be titled, “SEC’s Crowdfunding Proposal: Will it Work for Small Businesses?” and will examine how the proposal would affect small businesses.

Regulatory Activity

Financial Stability Board Releases New Consultative Document

The Financial Stability Board (FSB), in consultation with the International Organization of Securities Commissions (IOSCO), last week released a consultative document on “Assessment Methodologies for Identifying Non-Bank Non-Insurer Global Systemically Important Financial Institutions.” The document proposes a methodology for identifying entities whose distress or failure, because of their size, complexity, and systemic interconnectedness, would cause “significant disruption to the global financial system and economic activity across jurisdictions.” Particularly, it sets out sector-specific methodologies for: (1) finance companies, (2) securities broker-dealers, and (3) investment funds, including collective investment schemes and hedge funds. Public comments on this consultative document must be submitted by April 7, 2014.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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