Bank Lobby Drops Volcker Rule Lawsuit

Feb 13 2014 | 11:05am ET

A banking industry group has dropped its lawsuit against U.S. regulators after the latter amended part of the Volcker rule barring community banks from holding trust-preferred collateralized debt obligations.

The regulators recently agreed to a narrow exception for the CDOs, and remain in talks with the American Bankers Association, it said yesterday. The group's president, Frank Keating, said it dropped the December litigation "to constructively engage with the regulators without the chilling impediment of pending litigation."

"The interim final rule has allowed many banks to avoid taking hundreds of millions of dollars in unnecessary write-downs and has helped minimize the cost and compliance burden for those that are affected," Keating added.

The Volcker rule is designed to limit bank risk, and, among other provisions, bars banks from proprietary trading and strictly constricts their alternative-investment activities.

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