Volcker Rule Exclusion for TruPS CDOs

On January 14, the Fed, CFTC, FDIC, OCC and SEC issued an interim final rule which will permit banking entities to retain interests in certain collateralized debt obligations backed primarily by trust preferred securities (TruPS CDOs) if the following conditions are met: (i) the TruPS CDO was established and the interest was issued before May 19, 2010; (ii) the banking entity reasonably believes that the offering proceeds received by the TruPS CDO were invested primarily in Qualifying TruPS Collateral (as defined by the rule); and (iii) the banking entity’s interest in the TruPS CDO was acquired on or before December 10, 2013, the date the agencies issued final rules implementing section 619 of the Dodd-Frank Act (the Volcker Rule).  The agencies also released a non-exclusive list of issuers which meet the requirements of the interim final rule.  Comments must be submitted within 30 days of publication in the Federal Register.  Joint ReleaseJoint Interim Final RuleList of Excluded CDO Issuers.

Three Agencies Issue FAQ Regarding CDOs Backed by Trust Preferred Securities Under the Volcker Rule

On December 19, Fed, FDIC and OCC issued Frequently Asked Questions to clarify rules applicable to investments in covered funds and whether collateralized debt obligations backed by trust preferred securities (TruPS CDOs) could be determined to be covered funds under the Volcker Rule.  The FAQs clarify that banking entities that have holdings in TruPS CDOs may use the conformance period to determine if they can be brought into conformance by July 21, 2015ReleaseFAQ.

Rating Agency Updates

On May 11, S&P released a request for market feedback and comment relating to its methodology for rating local and regional governments outside of the U.S. Comments on the proposed criteria are requested by June 11. S&P Release. 

On May 11, S&P released a proposal to update its methodology and assumptions for rating U.S. state governments. Comments on the proposed criteria are requested by June 11.

On May 12, S&P released its updated criteria for investment earnings assumptions for federal government standalone housing transactions. S&P Release.

 On May 12, S&P released revised recovery assumptions for TruPS or hybrid securities issued by U.S. banks that are held in the collateral portfolios of TruPS CDOSS&P Release. 

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