Regulators mull change to Volcker Rule CDO provision

|By:, SA News Editor

Regulators are considering whether it would be "appropriate and consistent" with the Volcker Rule to allow smaller banks to hold certain CDOs of trust-preferred securities that they may otherwise have to sell. Authorities plan to make a ruling by January 15.

The news comes after the American Bankers Association threatened to sue over the provision, which the industry group says would force 275 small banks to take a $600M hit to capital.

At least three lenders - Zions Bancorp (ZION) being the most prominent - have said they would have to write down or divest such assets immediately at a substantial loss.

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