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Inside Washington (10/06/2011)
* WASHINGTON (10/7/11)--Regulators will soon release one of the most contentious elements of the Dodd-Frank Act: a proposal to ban proprietary trading and limitations on private equity investments. The plan would define proprietary trading, describe the circumstances in which financial institutions can invest in hedge or private-equity funds, and require banks to put in place internal compliance controls for the so-called Volcker Rule (American Banker Oct. 6). The Federal Deposit Insurance Corp. is scheduled to issue its proposal Tuesday. Other regulators are expected to unveil their plans around the same time. Under the proposal, regulators would define proprietary trading as participating in the purchase or sale of one or more covered financial positions as principle for the trading account of the banking entity. It would not include acting as an agent, broker, or custodian for unaffiliated third parties. Under the original statute, banks can engage in underwriting and market making-related activities. In the new proposal, certain requirements must be met so the trading activities are within exempted categories. A separate section of the proposal outlines the types of relationships a bank is prohibited from having with hedge and private-equity funds. The proposal would also prohibit a bank from acting as a general partner or trustee, selecting directors and managers, or having a name similar to a covered fund. Any bank taking part in certain trading or fund activities would be also required to comply with the prohibitions and restrictions related to Volcker Rule. These would include internal written policies and procedures, internal controls, management framework, independent testing, training and record keeping … * WASHINGTON (10/7/11)--U.S. banks have made progress in reforming their compensation practices since the 2008 financial crisis, but more changes are needed, according to a Federal Reserve report released Wednesday. “Incentive compensation practices at banking organizations are continuing to evolve and develop,” the Fed said. “We expect this evolution to continue.” Before the crisis, big banks didn’t pay adequate attention to risk when creating their incentive compensation packages, according to the report. “Some employees were provided incentives to take imprudent risks,” the Fed added. But all firms reviewed in the report have made progress in identifying the employees, such as traders and loan originators, whose incentive compensation packages could threaten the safety and soundness of an organization, the Fed said … * WASHINGTON (10/7/11)--Although he did not publicly criticize Bank of America Corp.’s decision to charge a monthly fee for debit card use, Raj Date, the de facto head of the Consumer Financial Protection Bureau, implied that a uniform disclosure standard for checking-account terms may be in the best interests for consumers (American Banker Oct. 6). Checking accounts often come with unexpected costs that can add up for consumers, Date said. Consumers should ideally have a more simple way to evaluate checking account costs, he suggested. Consumer groups and financial institutions are developing simplified disclosures that allow consumers to compare the checking account options from credit unions, large banks and community banks, he said …


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