WASHINGTON — The Federal Deposit Insurance Corp. board unanimously approved a proposal Thursday to simplify and ease the Volcker Rule, which regulators agree has become overly complex.

The FDIC board is among five agencies expected to sign off on the proposed changes to the proprietary trading ban imposed by the Dodd-Frank Act. The plan, which the Federal Reserve Board approved Wednesday, would tailor compliance programs for banks based on their trading volume and revise certain definitions to help banks determine what trades are banned. It would provide additional relief to banks with trading volume below $1 billion and foreign banks that trade outside the U.S.

Although the changes would significantly alter the compliance process, regulators maintain that the type of risky trading originally banned under the rule first envisioned by former Fed Chairman Paul Volcker would still be banned.

FDIC Chairman Martin Gruenberg
“The central goal from my standpoint is to preserve the core principles of the Volcker Rule as the agencies seek to provide greater clarity and simplicity to facilitate compliance,” outgoing FDIC Chairman Martin Gruenberg said. Bloomberg News

“The central goal from my standpoint is to preserve the core principles of the Volcker Rule as the agencies seek to provide greater clarity and simplicity to facilitate compliance,” outgoing FDIC Chairman Martin Gruenberg said during the board meeting. (His successor, Jelena McWilliams, was recently confirmed by the Senate and is expected to be sworn in soon.) “On that basis, I am prepared to support publication of the proposed rule in the Federal Register for public notice and comment,” Gruenberg said.

In addition to the Fed and FDIC, the proposal is expected to be released for comment by the Office of the Comptroller of the Currency, Commodity Futures Trading Commission and Securities and Exchange Commission.

Comptroller of the Currency Joseph Otting, who is also an FDIC board member, said the proposal goes “a long way in simplifying a very complicated rule,” particularly for community and midsize banks.

“The proposed changes reduce burden by substituting bright lines for ambiguous concepts while still allowing regulators to better assure compliance and to continue to safeguard the financial system from the risky behaviors that the statute was intended to prevent,” Otting said during the FDIC board meeting.

Regulators also said they would separately address a provision included in the regulatory relief bill signed into law last week that exempted banks with assets of less than $10 billion and little trading activity from the Volcker Rule.

The “agencies do not intend to apply or enforce the 2013 final rule with respect to those institutions excluded by the statute, nor do we intend to apply or enforce the naming restrictions that the statute revises,” Otting said.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.