House passes bill delaying Volcker compliance

A bill providing banks and CLO issuers an extra two years to comply with the Volcker rule has passed the US House of Representatives.

The US House of Representatives, the lower chamber of Congress, passed amendments to the controversial Volcker rule, extending the compliance date from July 2015 to July 2017.

The move legally confirms the Federal Reserve’s two additional one-year extensions for the Volcker rule that were mooted in April. The bill awaits Senate approval. 

The Volcker Rule prohibits banks from proprietary trading and acquiring ownership interests or sponsoring private equity and hedge funds.

The regulation also affects banks’ holdings in CLOs – securitized vehicles that are largely backed by commercial loans.

Although securitized loans comprised of loans and related servicing assets are excluded from Volcker Rule regulations, many CLOs include debt securities that do not conform. Banks must conform or divest interests and sponsorships of those CLOs by the end of the conformance period. But, in order to be eligible for the extension, non-excluded CLOs need to have been in place as of the end of 2013.