- Federal regulators have decided to ease the Volcker Rule and will allow smaller banks to hold certain CDOs of trust-preferred securities (TRuPS) that they may otherwise have had to sell.
- The move comes after the American Bankers Association threatened to sue over the provision, which the industry group said would have forced 275 small banks to take a $600M hit to capital.
- The change would apply to any bank that invested in TRuPS-backed CDOs that were issued by banks with under $15B in assets. There are also time conditions attached.
- At least three lenders - Zions Bancorp (ZION) being the most prominent - had said prior to the latest ruling that they would have to write down or divest the CDOs immediately at a substantial loss. Zions has assets of $55B.
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