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 The announcement came after lenders warned in a lawsuit of hefty
losses from the so-called Volcker rule.
The Volcker rule prohibits banks from owning hedge funds or private
equity funds to reduce risk, but the ban included a type of security
community banks regard as harmless.
The regulators said they would now reconsider whether these
instruments could be made exempt and would make a decision no later
than January 15.
A change would mark the first finessing of the Volcker rule, one of
the most hotly debated provisions of the Dodd-Frank law, which was
designed to overhaul Wall Street after the devastating financial
crisis of 2007-09.
Banks had argued in court that they needed a decision before the end
of the year because accounting rules would force them to write down
$600 million in capital this quarter if they knew they had to sell
the securities later.
But the regulators indicated that a decision by the middle of
January was early enough.
"The accounting staffs of the agencies believe that ... any actions
in January 2014 that occur before the issuance of December 31, 2013,
financial reports should be considered when preparing those
financial reports," they said.
Later on Friday, the two parties said they agreed to take more time
to sort out the issue, filing a joint motion in the court that gave
the regulators until January 17 to react, and the banks until
January 23 to reply.
Originally, the deadline for regulators had been set for Monday, and
that for banks on Tuesday.
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At stake are so-called collateralized debt obligations backed by
trust preferred securities — or TruPS CDOs — which have hybrid
characteristics of both debt and equity and can get a favorable tax
treatment.
The Federal Reserve, the Office of the Comptroller of the Currency
and the Federal Deposit Insurance Corporation had earlier told banks
they did not immediately need to sell the assets in question.
The case was filed by the American Bankers Association, in
conjunction with CB&T Bancshares Inc and its Citizens Bank and Trust
Co subsidiary, as well as MBT Financial Corp and its Monroe Bank and
Trust Co subsidiary.
"ABA appreciates the regulators taking this important step, and our
experts are studying to see if the affected banks indeed find
immediate interim relief from this action," ABA president Frank
Keating said in a statement.
(Reporting by Douwe Miedema; editing by
Kenneth Barry, Andrew Hay and Vicki Allen)
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