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Board of Governors of the Federal Reserve System
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Board of Governors of the Federal Reserve System

Supervision and Regulation Letters

SR 13-25

Interagency Statement Regarding the Treatment of Certain Collateralized Debt Obligations Backed by Trust Preferred Securities under the Volcker Rule

December 27, 2013

Seal of the Board of Governors of the Federal Reserve System
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D. C.  20551
DIVISION OF BANKING
SUPERVISION AND REGULATION
SR 13-25
December 27, 2013
TO THE OFFICERS IN CHARGE OF SUPERVISION AND APPROPRIATE SUPERVISORY AND EXAMINATION STAFF AT THE FEDERAL RESERVE BANKS AND TO FINANCIAL INSTITUTIONS SUPERVISED BY THE FEDERAL RESERVE
SUBJECT:   Interagency Statement Regarding the Treatment of Certain Collateralized Debt Obligations Backed by Trust Preferred Securities under the Volcker Rule
Applicability:  This guidance applies to all institutions regulated by the Federal Reserve, including those with $10 billion or less in total consolidated assets.

The Federal Reserve, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission (the “Agencies”) issued the attached statement to clarify the treatment of certain collateralized debt obligations (CDOs) backed by trust preferred securities under the investment prohibitions of section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, otherwise known as the “Volcker rule.”

The statement provides guidance to institutions as they assess the implementation of the Volcker rule and prepare their December 31, 2013 financial reports.  The agencies are reviewing whether it would be appropriate and consistent with the Dodd-Frank Act not to subject CDOs backed by trust preferred securities to the investment prohibitions of the Volcker rule.  The Agencies expect to address the matter no later than January 15, 2014.  The accounting staffs of the agencies believe that, consistent with generally accepted accounting principles, any actions in January 2014 that occur before the issuance of an institution’s December 31, 2013, financial reports should be considered when preparing those financial reports.

Reserve Banks are asked to distribute this letter and attachment to institutions supervised by the Federal Reserve in their districts, as well as to appropriate supervisory and examination staff.  Questions regarding the attached guidance should be addressed to Christopher Paridon, Counsel, Legal Division, at (202) 452-3274, or Steven Merriett, Deputy Associate Director and Chief Accountant-Supervision, Division of Banking Supervision and Regulation, at (202) 452-2531.  In addition, questions may be sent via the Board’s public website.1

signed by
Norah M. Barger
Acting Director
Division of Banking
Supervision and Regulation


Last update: September 5, 2014