Is Your Bank on Track to Meet Volcker Conformance Standards

© 2014 Grant Thornton LLP. All rights reserved.
Is your bank on track to
meet Volcker conformance
standards?
November 14, 2014
1:00 pm – 2:00 pm EST
We will be starting soon
Please disable popup
blocking software before
viewing this webcast

© 2014 Grant Thornton LLP. All rights reserved. 2
Awarding CPE for this session
• Remain logged in for the full session
• Respond to at least 75% of the monitoring devices
• Group participation will not receive CPE. You must be
logged in individually to receive CPE credit
• Upon conclusion of the program, complete the final
survey and your certificate will be available to print if
you have met the minimum CPE requirements
If you experience any technical difficulties, please contact 877.398.9939 or email GTWebcast@level3.com

Addressing your questions through Q&A

Other helpful features you can use
Be sure to shut down all other applications
to allow more Internet bandwidth.
Slides Help Resources Share Email

Graham Tasman
Principal,
Business Advisory Services
Philadelphia
215.376.6080
graham.tasman@us.gt.com
Ken Goodwin
National Senior Manager,
Bank Advisory and
Regulatory Services
New York
212.542.9685
kenneth.goodwin@us.gt.com
Presenters
Today's

Learning objectives
• Identify and evaluate Title V [Regulation of
advisors to hedge funds and others] and
VII [Swap Dealer/OTC derivatives]
implications
• Recognize Volcker Rule Title VI and its
implications
• Evaluate propriety trading vs non-
propriety trading [trading desk/functions
impacted]
• Identify and discuss the standard
compliance and enhanced program
compliance requirements
• Cite the covered funds/Super 23A
restrictions
Is your bank on track to meet Volcker conformance standards?

Agenda
• Dodd-Frank Act Overview
• Advisors/Hedge Funds Reform
• OTC/Derivatives Reform
• Volcker Rule Update
• Questions

Dodd-Frank Act Overview
The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly
known as the Dodd Frank Act or "DFA" was signed into law by President
Obama on July 21, 2010.
• 5th year of DFA with 220 of the 398 total required rulemakings have been
finalized while 95 rulemaking requirements have yet been proposed.
Three key themes of the DFA Act:
• Regulation should promote safety and soundness to the financial industry
• Regulators are streamlined and consolidated to promote clear missions
• Emphasis is on rule based regulation as opposed to principles-based
regulation

Dodd-Frank Act – Title Provisions
DFA has 16 title provisions covering financial stability to Section
1256 Contracts
• Title IV (Advisors/Hedge Funds Reform) – Regulations of
Advisers to Hedge Funds and Others
• Title VI ("Volcker Rule") – Improvements to Regulation of
Bank and Savings Association Holding Companies and
Depository Institutions
• Title VII (OTC Derivatives/Swaps Reform) – Wall Street
Transparency and Accountability

Agenda
• Dodd Frank Act Overview
• Questions

Title IV – Advisors/Hedge Funds
Title IV of the Dodd-Frank Wall Street Reform and Consumer Protection Act
makes numerous changes to the registration and reporting and
recordkeeping requirements of the Investment Advisers Act of 1940. Among
these is the requirement that advisers to most private funds (hedge funds and
private equity funds) register with the Commission.
Key Themes from Title IV:
• Enhances Broker Dealer Oversight regarding regulation of securities
products, trading strategies and fee structures
• Grants authority to collect data from registered investment advisers about
their private funds for the purposes of the assessment of systemic risk
• Made changes to Form ADV
• Amendments to "Pay to Play" Rule
• Established Internal Control Structures for Credit Rating Agencies

Agenda
• Questions

Title VII: OTC Derivatives Reform
As mandated by Title VII of the Dodd-Frank Act, sufficiently liquid and
standardized derivatives transactions will be subject to central clearing
requirements, and many of those will be required to be executed on
new electronic trading platforms (known as "Swap Execution
Facilities" or SEFs).
Key Themes from Title VII:
• Reporting swap transactions to a swap data repository (SDRs);
• Clearing sufficiently liquid and standardized swaps on central
counterparties, or designated clearing organizations (DCOs);
• Where appropriate, trading standardized swaps on SEFs or
designated contract markets (DCMs);
• Setting higher capital and minimum margin requirements for
uncleared swaps

Agenda
• Questions

Volcker Rule: Impacted organizations
The final rule prohibits entities from acquiring ownership
of or sponsoring certain hedge funds and private equity
funds, referred to as "covered funds," such as:
• Insured depository institutions
• Their holding companies
• Foreign banking organizations
• Affiliates of these entities
The final rule also generally prohibits proprietary trading
at similar institutions.

Impacted units
Governance: Note Internal Audit is
also impacted
CEO signoff
LOBs
Trading Desks
Sponsor groups
Compliance
Technology
Operations
Risk Management
Finance

Compliance program requirements
• The more substantial a banking entity's trading and fund activities
are, the more extensive the entity's compliance program should be
• No formal requirement – Small, non-complex banking entities that
do not engage in proprietary trading or covered fund activities –
other than trading in US government agency obligations, or state
and municipal obligations – do not need to set up a compliance
program
• To reduce compliance burden, the Volcker Rule permits smaller,
less complex banking entities with total consolidated assets of
$10 billion or less than engage in covered proprietary trading
and/or covered fund activities to implement a simplified compliance
program
– Can edit their existing policies and procedures about their status
against the rule and the control framework that they have in place and
must demonstrate that they are in compliance with the requirements

Compliance program requirements:
Standard
• A management framework that delineates responsibility and accountability for
complianceGovernance
• Written policies and procedures reasonably designed to document, describe,
monitor and limit activities for (1) covered funds and (2) proprietary trading
activates
Policies and
Procedures
• A system of internal controls reasonably designed to monitor compliance
• Controls support the policies and procedures
System of
Controls
• Records sufficient to demonstrate compliance with the rule and retained for five
yearsRecordkeeping
• Training for trading personnel and managers, as well as other “appropriate”
personnelTraining
• Independent testing of the compliance program
• Can be undertaken by internal audit or third party
Independent
Testing

Compliance program requirements:
Enhanced
• The policies and procedures must describe the process for identifying the financial
instruments each trading desk may buy or sell, with separate documentation for
permissible market-making and hedging activity.
Trading Desks
• Written policies and procedures reasonably designed to document, describe,
monitor and limit activities for the range of risks undertaken
• Must address end to end risk management process
Description of risks
and risk management
program
• The risk limits for each trading desk should be based on quantitative measures of
potential loss and associated system of controls
Authorized risks,
instruments and
products
• Risk-mitigating hedging instruments and strategies and responsibilities
Hedging policies and
procedures
• Quantitative measures "metrics" as specified in the Final Rule Type 1: Risk-
Management Measurements, Type 2: Source-of-Revenue Measurements or Type
3: Customer-Facing Activity Measurements
• Others as appropriate
Analysis and
quantitative
measurements
• Procedures for immediate review and investigation of the trading desk’s activities,
escalation to senior management, and timely notification to the regulator
Remediation of
violations
Standard elements of a compliance program and the specific procedures to address the areas below
Banking entities with total assets of $50 billion or more but trading assets and liabilities of less than $10 billion would be subject
to the enhanced program without metrics.

Timetable for Volcker Rule
Trading Assets
and Liabilities
September 2,
2014
July 21,
2015
April 30,
2016
December 31,
2016
Metrics reporting
Enhanced
compliance program
Full compliance
program for size and
scale of activities
Metrics reporting
and enhanced
compliance
program
Full compliance
program for size and
scale of activities
Metrics reporting
and enhanced
compliance program
Update existing
compliance program
Must be able to
demonstrate status
$50 billion or
more
between $25B
and $50B
between $10B
and $25B
$10 billion or
less modest
activities
$10 billion or
less (No VR
activities)

Polling question #1
• True
• False
The Volcker Rule currently has 17 reporting metrics for
determining whether trading activities are appropriate.

Polling question #2
• True
• False
CEOs of banking entities that are subject to enhanced
compliance standards must attest annually that their
controls and processes are "reasonably designed" to
ensure compliance with the Volcker Rule.

Polling question #3
• True
• False
The Volcker Rule implements the statutory provision
prohibiting a banking entity from acquiring and
retaining ownership interest (directly or indirectly) in a
covered fund or having certain relationships with a
covered fund. The final Volcker Rule on Covered
Funds expanded the definitions of covered fund and
trustee.

Questions?
Comments?

Graham Tasman
Principal,
Business Advisory Services
Philadelphia
215.376.6080
graham.tasman@us.gt.com
Ken Goodwin
National Senior Manager,
Bank Advisory and
Regulatory Services
New York
212.542.9685
kenneth.goodwin@us.gt.com
Information
Contact

Disclaimer
This Grant Thornton LLP presentation is not a comprehensive
analysis of the subject matters covered and may include
proposed guidance that is subject to change before it is issued
in final form. All relevant facts and circumstances, including the
pertinent authoritative literature, need to be considered to arrive
at conclusions that comply with matters addressed in this
presentation. The views and interpretations expressed in the
presentation are those of the presenters and the presentation is
not intended to provide accounting or other advice or guidance
with respect to the matters covered.
For additional information on matters covered in this
presentation, contact your Grant Thornton, LLP adviser.

To retrieve your CPE certificate
• Respond to online evaluation form. Please note you may need to
disable pop-up blocking software to complete this evaluation.
• Print your CPE Certificate and retain for your records. Participants
are responsible to maintain CPE completion records.
• Those receiving CPE will also receive the certificate at the email
address used to register for the webcast.
• We are unable to grant CPE credit in cases where technical
difficulties preclude eligibility. CPE program sponsorship guidelines
prohibit us from issuing credit to those not verified by the
technology to have satisfied the minimum requirements in
monitoring response and viewing time.
Thank you for attending

Thank you for attending
• Visit us online at:
www.GrantThornton.com
twitter.com/GrantThorntonUS
linkd.in/GrantThorntonUS
• For questions regarding your CPE certificate,
contact CPEEvents@us.gt.com

Is Your Bank on Track to Meet Volcker Conformance Standards

Recommended

Recommended

More Related Content

What's hot

What's hot (20)

Similar to Is Your Bank on Track to Meet Volcker Conformance Standards

Similar to Is Your Bank on Track to Meet Volcker Conformance Standards (20)

Is Your Bank on Track to Meet Volcker Conformance Standards