OCC’s Interim Volcker Rule Examination Procedures Provide Much-Needed Guidance to Banks Seeking to Comply

On June 12, 2014, the Office of the Comptroller of the Currency (OCC) issued interim procedures for examiners to assess banks’ progress in developing a framework to comply with the requirements of what is commonly known as the “Volcker Rule.” The interim procedures would apply to examinations of national banks (other than certain limited-purpose trust banks), federal savings associations, and federal branches and agencies of foreign banks (collectively, “Banks”). Although the OCC’s interim procedures are addressed to examiners rather than banks, they shed some (long awaited) light on the OCC’s focus and priorities with regard to the implementation of the Volcker Rule.

The Volcker Rule prohibits banking entities from engaging in short-term proprietary trading of financial instruments (“Proprietary Trading”) and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds (“Covered Funds”). Unless the Board of Governors of the Federal Reserve System (“Federal Reserve”) extends the conformance period again, Banks must conform their activities and investments to the regulations’ requirements by July 2015. However, as stated in the OCC’s interim procedures, Banks that do not have ownership interest in, sponsor, or have certain relationships with Covered Funds (“Cover Fund Activities”) and limit their Proprietary Trading to domestic government obligations are not required to adopt compliance programs or report metrics, and OCC examiners are not required to conduct additional procedures.

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