As 2014 wound down, the banking industry received a couple of gifts from regulators.
The deadline for complying with one aspect of the Volcker Rule — selling off private equity and hedge fund holdings — was extended to 2017 from 2015, and the swaps push-out rule, better known as the Lincoln Amendment, was repealed. Repealing the Lincoln Amendment means banks will no longer have to "push out" a portion of their derivatives business into a non-FDIC insured entity.
Both the Volcker Rule and the Lincoln Amendment are part of the Dodd-Frank Act, a sprawling piece of bank reform legislation passed in July 2010. Three and a half years on, roughly 90 percent of the rules required under Dodd-Frank have been written, though not all have been fully interpreted or implemented by regulators.
CNBC sat down with Dan Ryan, chairman of PwC's Financial Services Regulatory Practice, to get his read on what is ahead on the regulatory front for the banking industry in 2015, whom the legislators are to watch, and how the regulations are impacting the industry today, and how they might affect it in the future.
CNBC: Ninety percent of Dodd-Frank has been written, but how these rule should be applied is still not clear. What rules need clearer interpretation in 2015?
Ryan: There are three big ones. One is Volcker, which is the rule against proprietary trading and how much risk-taking the bank does. The rule has been written, lot of controversy over it. The banks have submitted a lot of data, the biggest banks to the regulators, and the banks are waiting to hear back as to what the regulators think about the results. The other is the living wills area. The FDIC has been quite vocal about saying the living wills for the biggest banks are not credible.That means they don't believe the banks could be unwound through the bankruptcy system without some kind of federal bailout. The Fed, who also has to weigh in, has been quiet about this, so I think this is going to be the year we find out what the real answer is to the too-big-to-fail issue. The third thing is the liquidity coverage ratio. The banks now have to hold a lot more liquidity than they did pre-crisis, so we'll see what kind of impact that is going to have both in terms of the way the banks do business, the way they lend and the whole deposit business in general.