Favorable Regulatory Landscape Predicted for Financial Institutions; FSOC Agencies Seek Consensus on Volcker Rule Changes

A recent report concludes that the emerging regulatory landscape is favorable for financial institutions. The Oliver Wyman report asserts that the loosening of financial regulations is highly likely, despite the contentious political atmosphere in Washington. The report predicts that smaller banks will benefit disproportionately, but big banks are in a considerably more favorable position than expected in January -- citing the U.S. Treasury June report which largely aligns with the positions of the banking industry on prudential regulation.  The report cautions that uncertainty remains, particularly depending on the outcome of mid-term elections and the possibility that independent agencies will move away from Trump Administration positions.

Meanwhile, the OCC is soliciting public input on whether certain aspects of the Volcker Rule should be revised to better accomplish the purposes of the regulation while decreasing the compliance burden on banks and fostering economic growth. In particular, the OCC’s notice invites input on ways to tailor the rule’s requirements and clarify provisions regarding the proprietary trading prohibition on banks, the prohibition on banks from acquiring, holding or sponsoring a private equity fund or hedge fund, and key compliance and reporting requirements. The Wall Street Journal reported that FSOC member agencies recently discussed recommendations from the Treasury Department in its June report to change the Volcker Rule. However, the agencies have not reached an agreement on specific changes to the rule.