ABA threatens to sue regulators over Volcker Rule

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The American Bankers Association said it will file a lawsuit challenging the Volcker Rule unless regulators agree to suspend portions that restrict certain collateralized debt obligations of trust-preferred securities, American Banker reported Monday.

"If the rule is not suspended, we will shortly file a lawsuit challenging the rule … and seeking emergency relief," Frank Keating, the ABA's president and CEO, in a letter to federal regulators.

According to the report, at issue is whether banks are required to dispose CDOs composed of trust-preferred holdings and how quickly they must do so.

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"In light of the short time frame banking entities have to evaluate the status of their investments, make decisions regarding valuations and reach agreement with their accountants, we request, in the interest of fairness, that you issue a stay of these provisions, and that you keep this stay in effect until these issues are resolved, either through further dialogue or, if necessary, by the courts," Keating said.

CDOs, which are collateralized against an asset pool comprising a variety of bonds and other fixed-income securities, were blamed for the 2008 financial crisis.

Click here to read the full report from American Banker.

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