FDIC Drops Accounting Prong for Volcker Rule

By Stephen Barlas
November 1, 2019

In announcing its final changes to the Volcker Rule, which restricts proprietary trading by banks, the Federal Deposit Insurance Corporation (FDIC) decided not to include an accounting measure that it had proposed in 2018 as a means of determining whether a bank violated the law.


The Securities Industry and Financial Markets Association (SIFMA) said not going ahead with the new accounting measure was a victory for capital formation.


The FDIC had proposed that if a financial instrument is “recorded at fair value on a recurring basis” under U.S. Generally Accepted Accounting Principles (GAAP), then any purchase or sale of the financial instrument would have amounted to proprietary trading. The SIFMA added, “The removal of the accounting prong is a positive step forward in ensuring the regulatory definition of ‘trading account’ does not go beyond the statutory definition and Congressional intent.”


Stephen Barlas has covered Washington, D.C., for trade and professional magazines since 1981 and since 1984 for Strategic Finance and its predecessor Management Accounting. You can reach him at sbarlas@verizon.net.
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