WASHINGTON — A year after regulators finalized the Volcker Rule, implementing the ban on banks' proprietary trading activities is still very much a work in progress.

The largest institutions have already begun reporting metrics on their trading volumes. But with full compliance required by July, figuring out which trades or private equity-related activities are banned or still permitted has led to long hours and persistent uncertainty.

Banks are said to be seeking clarification still from the regulators on what activities are allowed, as well as requesting further delays on compliance deadlines. Under the law, the Federal Reserve Board — one of the five agencies that wrote the rule — can give institutions more time to implement it.

"There are an enormous amount of resources being thrown at evaluating what the rule means for real institutions and how they can build satisfactory compliance systems," said Thomas Vartanian, partner at Dechert LLP. "It has proven to be very daunting to take the black and white words of the rule and apply them to complex businesses that don't necessarily fall into black and white categories."

The rule — first proposed by former Federal Reserve Board Chairman Paul Volcker and mandated in the Dodd-Frank Act — was approved last December on a day when regulators met despite the government being closed for a snowstorm. (In addition to the Fed, it was written by the Office of the Comptroller of the Currency, Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Deposit Insurance Corp.)

The prohibited activities must be ceased by July 21. Those include making bets through a bank's own trading book that are not eligible for the exemptions allowed in the rule. The regulation also severely restricts a bank from engaging in activities with "covered" private equity or hedge funds. The rule includes exceptions for market-making activities.

Chris Scarpati, a partner in the financial regulation practice at PricewaterhouseCoopers, said large trading banks — those with at least $50 billion in trading assets and liabilities — have already crossed the finish line in terms of reporting their quantitative trading data, which was required in September. (Banks with smaller trading platforms must meet the reporting requirement in 2016.)

But determining whether trading activities are part of the ban or are exempted is another matter, Scarpati said. Deciphering the "covered funds" section of the rule, which outlines the entities in which a bank cannot hold an investment interest, is a particular source of anxiety, he said.

"The difficulty has been in understanding where the regulator may have issues with trading activity," Scarpati said. "That really is the big unknown here."

Last month Scott Alvarez, the Fed's general counsel, reportedly said the central bank is reviewing requests to delay the July implementation deadline. "The Fed is … thinking about the very many requests we've gotten to extend the conformance period, particularly for covered funds," Alvarez said in remarks to an American Bar Association conference, as reported by Bloomberg. "We'll have the answer for folks on that pretty soon."

(The Fed and other regulators declined to comment for this article.)

Vartanian said banks have been repeatedly going back to the Fed and other regulators to try to get some clarity on which investments they must sell and which they may keep. Without that clarity, he said, banks fear they could face an enforcement action down the road.

"In this environment, financial institutions are investing enormous resources and time trying to work with regulators on the compliance end, and are reluctant to unnecessarily provoke regulatory disagreements," Vartanian said. "Frankly, it's as taxing and perplexing for the regulators as it is for the institutions."

In addition to seeking clarity from regulators, observers say it is also possible banks could seek help from lawmakers either to water down the rule or to prod the regulators to ease the compliance requirements.

"With the GOP assuming control of the Senate next year, banks may see an opportunity. The industry already succeeded in getting Congress to eliminate another Dodd-Frank provision that required banks to separate certain portions of their derivatives portfolios from their bank subsidiary. The so-called swaps "push-out" was removed in the most recent spending bill."

"The Volcker rule is really where it's at, not the push-out rule," said Mayra Rodriguez Valladares, principal at MRV Associates.

"It's worth lobbying for the banks to weaken the Volcker rule, because it's so much money out of what they do right now. They're watching very carefully what happens with the push-out rule, because that's small peanuts in comparison."

Scarpati agreed that banks are interested in having Congress mitigate the effect of the Volcker rule.

If "the rule can be changed to be less onerous, of course [banks] would prefer" that scenario, he said. "I think we're seeing it now with the spending bill."

Another big question mark related to implementing the current regulation is whether banks decide just to exit all potentially affected trading markets — even those ultimately exempted from the ban — to ensure their compliance by the deadline.

Scarpati said that is not a likely outcome, even if there is no compliance date extension.

A "wholesale exiting of markets? I don't believe that will happen," he said.

Vartanian said the lack of certainty about which activities are and are not permissible suggests that full compliance by banks may be elusive in the near future.

"I think the rolling inception of the Volcker rule and evolving interpretations of it, matched with the business restructurings that will have to take place, suggest that we will not achieve normality in the next year," Vartanian said. "It may take several years to work through all this."

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