Volcker Rule: Calibration to 2.0

FEBRUARY 2020
Volcker Rule:
Calibration to 2.0
Preliminary
Impact Analysis

Copyright © 2020 Accenture. All rights reserved.
TABLE OF CONTENTS
1.0 Context
1.1 Volcker Rule: Background and Evolution
1.2 Volcker Impact: Moderate and Significant Institutions
2.0 Volcker CapabilityModel
2.1 Volcker Impact Assessment: Moderate Institution
2.2 Volcker Impact Assessment: Significant Institution
3.0 Volcker Command Center
3.1 Our Perspective: Holistic Volcker Compliance Program
4.0 Recalibration Journey
4.1 Volcker Recalibration Model
4.2 Volcker Recalibration Framework
22Copyright © 2020 Accenture. All rights reserved.

Copyright © 2020 Accenture. All rights reserved.Copyright © 2020 Accenture. All rights reserved. 3
1.0 CONTEXT
VOLCKER RULE BACKGROUND
AND EVOLUTION

Copyright © 2020 Accenture. All rights reserved. 4
1.1 VOLCKER RULE: BACKGROUND AND EVOLUTION
4
Key ImpactThemes
• Effective April 1st 2014, under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker
Rule prevented banks from engaging in short-term proprietary trading and limited investments and
sponsorships with hedge funds or private equity funds
• The Volcker Rule was intended to maintain the safety and soundness of the U.S. federal banking system
• In August 2019, the five federal regulatory agencies published the revised rules in the Federal Register:
• Under the revised rules, compliance requirements have been tiered based on trading activity. The
revised rules also provide additional clarity around activities allowed under the law, while considering
industry consultations and regulatory changes
• The revised rules are effective January 1st, 2020 with a compliance date of January 1st, 2021
• Rules have been jointly developed by the Federal Reserve Board, the Commodity Futures Trading
Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the
Securities Exchange Commission
Background and Evolution
Timelinefor Implementation
January 1, 2021
Compliance date for
the Revised Volcker
Rule
Effective date for the
Revised Volcker Rule
January 1, 2020
Final Volcker Rules
published in the
Federal Register
August 20, 2019
Trading Activities
• Expanded scope for exclusions including
liquidity management instruments,
correction of bona-fide trading errors,
select customer-driven swaps, etc.
• Expanded scope of hedging activities by
reducing the need to demonstrate risk
mitigation
Trading Desk
• Defined multi-factor desk per the Market
Risk Capital Rule to streamline
operational, management and global
regulatory requirements
Compliance Program
• Established tiered compliance
requirements based on trading activity
• Reduced compliance program
obligations
Reporting Requirements
• Developed metrics and controls for
reporting under revised Volcker rule
• Defined regulatory reporting format
The VolckerRule amendments are designed to simplify the rule and streamline compliancerequirements,however,existing Volcker
programsrequirerealignmentacrossfour key dimensionsto be compliantby January1st
2021
Sources:Agencies Finalize Elements ofVolcker 2.0 Volcker Rule: Version 2.0

1.2 VOLCKER IMPACT: MODERATE AND SIGNIFICANT INSTITUTIONS
IMPACT AREAS
Under Volcker2.0,Moderate Institutionshave to roll back or realign to new requirements,while SignificantInstitutionshave to realign
and configure new requirements,includingmetric reporting
5
Low – Medium Impact
POTENTIAL IMPACT: Roll back or realignment
of Volcker Program
Between $1–20 billion
in gross trading assets
MODERATE INSTITUTION
• Realignment of scope of trading activities focused on definitions, rebuttable presumptions and exclusions
• Enhancements to exemptions to simplify compliance requirement obligations for banking entities under this tier
• CEO Attestation no longer mandatory
• Required to implement a simplified program by incorporating Volcker Rule
compliance into existing polices and procedures
• Quarterly reporting of value at risk, internal limits and usage, comprehensive profit
and loss attribution, positions and transaction volumes
Proprietary Trading
Activities
Covered Funds
• Removal of requirement of counting interests in third-party covered fundstoward 3% limit and capital deduction, allow ing covered fund interest as a hedge w hen acting as a
intermediary on behalf of a customer, and SOTUS (solely outside of the United States) exemptions to provide significant relief from compliance obligations
• Key elements of the covered funds to be addressed further in a new separate proposal
Compliance Program
Reporting and Record
Keeping
• Metrics reporting no longer applicable
• Mandatory CEO Attestation
• Required to implement fullsix-pillar compliance program
• Prescriptive enhanced compliance requirements have been eliminated (Appendix B
of the 2013 Rule)
Medium – High Impact
Over $20 billion
in gross trading assets
SIGNIFICANT INSTITUTION
POTENTIAL IMPACT: Realignment / configuration of
existing Volcker Program
BENEFITS
Reduction of Costs
MODERATE INSTITUTION SIGNIFICANT INSTITUTION
Operational Efficiency
• Synergies betw een compliance programs and requirements to implement revised
Volcker rule
• Reduce costs such as third-party audits and reduced metrics reporting activities
• Enhanced infrastructure through streamlined systems, reporting and compliance
• Reduced metrics and reporting requirements and activities
• No approvalprocess on Volcker panels / metrics
• No CEO Attestation and sub-attestation processes
• Simplified governance
• Streamlined metrics and reporting
• Command center and dashboard reporting for monitoring and analytics
• Holistic compliance monitoring and compliance capabilities
Sources:Agencies Finalize Elements ofVolcker 2.0 Volcker Rule: Version 2.0

2.0 CAPABILITY MODEL
OUR ASSESSMENT ON
VOLCKER CAPABILITIES

3.0 Compliance Program
Enhanced Minimum Standards for Compliance Program
2.1 VOLCKER IMPACT ASSESSMENT: MODERATE INSTITUTION
Changes to compliance requirements for an institution previously classified asSignificant(under Volcker 1.0)transitioning to a
Moderate Institution (under Volcker 2.0)
1.1 Proprietary Trading Restrictions
Definitions
Rebuttable Presumption
and Response
Exclusions
Exceptions
Underwriting MarketMaking Risk Mitigating Hedging
Near Term Customer Demand Reduction of Risk
Permitted Trading
Government and
Municipal Obligations
Trading on
Behalf of Customers
Trading by a Regulated
Insurance Company
Other Permitted Proprietary
Trading Activities
Limitations on Permitted
Trading Activities
1.2 Covered Fund Activities and Investments
Prohibitionon Acquisitionor
Retentionof OwnershipInterests
in Certain Relationships with a
Covered Fund
Activities Permitted in
Connection with
Organizing and Offering
a Covered Fund
Permitted
Investmentin
a Covered
Fund
Other
Permitted
Covered Fund
Activities
Ownershipof Interests in and Sponsorship of Issuers of
Certain CollateralizedDebt Obligation Backedby Trust-
Preferred Securities (NEW)
Limitations on
Relationships
with a Covered
Fund
Other Limitations on
PermittedCovered
Fund Activities
Management
Framework (N/A)
Independent
Testing and
Audit (N/A)
Internal
Controls (N/A)
Record
Keeping (N/A)
Training (N/A)
5.0 Business Capabilities
CEO
Attestation (N/A)
2.0 Trading Desk Requirements
Products,
Instruments and
Exposures
Compensation
Risk and
Exposure Limits
Desk
Reporting
Process Execution
Data Handling
and Configuration
Exception Handling
Re-Runs
Analytics and Drill Down
Lineage and Traceability
UserInterfaceandReporting
A A R
A
G G
G G G
G
G G
G
G
A A
A AA
A
AA
R
Policies and
Procedures
A
Trading Activities of a
Foreign BankingEntity
G
Legend:
G Minor
A Moderate
R Significant
Change
New Requirement
RemovedProduction Capabilities
Not Mandatory
4.0 Reporting and Record Keeping
Customer Facing ActivityRisk Management
Risk Factor Sensitivities
Source of Revenue
Value at Risk
(Prev. Value at Risk and Stress Value at
Risk)
Comprehensive Profitand Loss
Attribution
Internal Limits and Usage
(Prev. Risk and Position)
Supervisory / Regulatory ExaminationG
7
Monitoring /
Surveillance
Limit Management
and Governance
Qualified Independent
Testing and Audit
Positions
(Prev. Inventory Aging)
Transaction Volumes
Customer Facing Trade Ratio
Inventory Turnover

3.0 Compliance Program
Enhanced Minimum Standards for Compliance Program
2.2 VOLCKER IMPACT ASSESSMENT: SIGNIFICANT INSTITUTION
1.1 Proprietary Trading Restrictions
Definitions
Rebuttable Presumption
and Response
Exclusions
Exceptions
Underwriting MarketMaking Risk Mitigating Hedging
Near Term Customer Demand Reduction of Risk
Permitted Trading
Government and
Municipal Obligations
Trading on
Behalf of Customers
Trading by a Regulated
Insurance Company
Other Permitted Proprietary
Trading Activities
Limitations on Permitted
Trading Activities
1.2 Covered Fund Activities and Investments
Prohibitionon Acquisitionor
Retentionof OwnershipInterests
in Certain Relationships with a
Covered Fund
Activities Permitted in
Connection with
Organizing and Offering
a Covered Fund
Permitted
Investmentin
a Covered
Fund
Other
Permitted
Covered Fund
Activities
Ownershipof Interests in and Sponsorship of Issuers of
Certain CollateralizedDebt Obligation Backedby Trust-
Preferred Securities (NEW)
Limitations on
Relationships
with a Covered
Fund
Other Limitations on
PermittedCovered
Fund Activities
Policies and
Procedures
Management
Framework
Independent
Testing and
Audit
Internal
Controls
Record
Keeping
Training
4.0 Reporting and Record Keeping 5.0 Business Capabilities
Monitoring /
Surveillance
Limit Management
and Governance
CEO
Attestation
Qualified Independent
Testing and Audit
Supervisory / Regulatory Examination
2.0 Trading Desk Requirements
Products,
Instruments and
Exposures
Compensation
Risk and
Exposure Limits
Desk
Reporting
Customer Facing ActivityRisk Management
Risk Factor Sensitivities
Source of Revenue
Process Execution
Data Handling
and Configuration
Exception Handling
Re-Runs
Analytics and Drill Down
Lineage and Traceability
UserInterfaceandReporting
A A R
A
G G
G G G
G
G G
G
G
A A
A AA
A
AA
Value at Risk
(Prev. Value at Risk and Stress
Value at Risk)
A
Comprehensive Profit
and Loss Attribution
A
A
A
A A A A A
G
G
Trading Activities of a
Foreign BankingEntity
Internal Limits and Usage
(Prev. Risk and Position)
A
G
Legend:
G Minor
A Moderate
R Significant
Change
New Requirement
RemovedProduction Capabilities
Not Mandatory
8
Positions
(Prev. Inventory Aging)
Transaction Volumes
Customer Facing Trade Ratio
Inventory Turnover
R
R
Changes to compliance requirements for SignificantInstitutionsunderthe new Volcker 2.0 rules

3.0 COMMAND CENTER
OUR PERSPECTIVE ON
HOLISTIC COMPLIANCE

A Volcker Command Center can allow firms to
streamline compliance with Volcker Rules and
integrate functions across the enterprise to
demonstrate holistic compliance
1. Permit Analytic Capabilities
2. Provide a Holistic Trading Desk View
3. Streamline Internal / External Reporting
4. Aggregate Compliance Program Artifacts
5. Proactively Identify and Manage Risks and
Issues
3.1 OUR PERSPECTIVE: HOLISTIC VOLCKER COMPLIANCE PROGRAM (1 OF 2)
Visual Mockup:
This illustrative example is the
dashboard version for a
Significant Institution.
Demo available upon request.
Volcker Command Center
CommandCentercan be leveragedto supportother regulatory
initiatives e.g.,FundamentalReviewof the Trading Book (FRTB)
Establishing a holistic VolckerComplianceprogram can streamlineoperationalrequirements,facilitate reportingrequirements,and
demonstrate compliancewith rule requirements acrossenterprisefunctions

3.1 OUR PERSPECTIVE: HOLISTIC VOLCKER COMPLIANCE PROGRAM (2 OF 2)
Establishing a holistic VolckerComplianceprogram can streamlineoperationalrequirements,facilitate reportingrequirements,and
demonstrate compliancewith rule requirements acrossenterprisefunctions
The Volcker Command
Center can provide a
centralized solution to
streamline and
effectively manage /
track Volcker Rule
Compliance
Requirements
Let’s apply the
Volcker Command
Center to monitor
and track
compliance
holistically!
Dashboard Reporting Metrics (not mandatory per Volcker 2.0 but can be
considered to enhance the compliance function)
• Internal limits and usage controls and metrics aligned to marketrisk
rules.
• Qualitative commentaryto describe trading desk limitresults
OUR APPROACH
• Establish a flexible and customizable solution to manage compliance requirements using business intelligence tools
• Leverage dashboards to deliver business capabilities across functions
• Streamline operational and reporting requirements to align with the spirit of the rule
Allow users across the firm (i.e. traders, compliance officers, CEO) to evaluate Volcker Rule alignment and deploy a holistic and integrated
solution to monitor compliance
OUR VALUE
Dashboard Reporting Metrics (mandatory)
• Internal limits and usage controls and metrics
• Positions
• Transaction volumes
• VaR
Moderate Institutions Dashboard and Reporting
Low er Limits:
Trading Desk X:
• Less of low er limit by
2% due to trade error
• Additional hedging
strategy implemented
• Low er trade volumes
due to quarterly
results release of
Google
Significant Institutions Dashboard and Reporting

4.0 RECALIBRATION
JOURNEY
OUR DELIVERY FRAMEWORK FOR COMPLIANCE

Volcker
Capability
Blueprint
Maturity /
Gap
Assessment
Delivery
Prioritization
Capability
Driven
Roadmap
Requirement
Traceability
Target
Operating
Model
Strategic Alignment
Compliance
Pillars
Trading
Desk
System
Enhancement Change Enablement
Ongoing
Monitoring
Regulatory
Management
Governance
Accenture Volcker Capability Model
Governance and Controls
Implementation Considerations
Rule
Interpretation
Training
Communication
Behavioral Change
Management
Independent
Testing
Surveillance and
Monitoring of Change
Dashboard / Command
Center Development
Desk
Classification
Desk Limit
Definition
Desk Metric
Reporting
Desk Policies and
Procedures
Enhancement
RENTD / Market Maker
Inventory Measure
(MMIM) Configuration
Metric Reporting
Configuration
Control Reporting
and Alerts
Exception Handling
and Error Management
Exclusion / Outside the
Trading Account (OTA)
/ TOTUS Monitoring
Internal Limits / Risk
Factor Attribution
Compliance Policies
and Procedures
Manual (2nd line)
Escalation and Limit
Management
Internal Control
Framework
Make sure there is alignment on degree of compliance
and the suite capabilities required to put Volcker in
production (e.g., alerts, escalation workflow)
Strategic Alignment
Establish a consistent and holistic approach across the
enterprise with the ability to demonstrate compliance
and traceability to the rule
Compliance Pillars
Implement a Trading Desk Command Center to monitor,
measure and demonstrate compliance and provide a
holistic view
Trading Desk
Configure / retire systems to align with revised rule
requirements and consider additional capabilities that
can facilitate compliance obligations
System Enhancements
Design an effective training program to realign with
revised requirements and implement surveillance and
monitoring tools to evaluate the degree of change
Change Enablement
Consider a proactive solution to monitor and measure
compliance across limits and controls with effective
workflow solution
Governance and Controls
4.1 VOLCKER RECALIBRATION MODEL
Rules of
Engagement
The Capability Modelbuilds the capabilities required for SignificantInstitutionsand can be adjusted for Moderate Institutions
Stakeholder
Attestation
Internal Control
Inventory
Audit & Record
Management
Not Mandatory for
Moderate Institutions

Governance & Controls
• Proactively monitor and
measure compliance
across limits and
controls
Strategic Alignment
• Align on the degree of
compliance
• Define the capabilities
required to allow Volcker
Compliance Pillars
• Establish a consistent
and holistic approach
• Demonstrate traceability
to the rule
Trading Desk
• Implementa Trading
Desk Command Center
• Provide a holistic view
of compliance activities
System Enhancements
• Reconfigure or retire systems
based on revised rule
• Consider additional
capabilities
Change Enablement
• Realign employees through
training program
• Use monitoring tools to
evaluate the change
4.2 VOLCKER RECALIBRATION FRAMEWORK
70-75% 75-80%
Capability
Blueprint
CAPABILITY
• Change Enablement
• Enhanced Monitoring
CAPABILITY MATURITY
15-20%
Target Operating Model
Governance &
Controls
Dashboard /
Command
Center
Exception Handling
Policies and
Procedures
Analytics
Reporting
Independent
Testing
Implementation
Considerations
Anticipated
Outcomes
Sample
Deliverables
Capability-Driven Plan for Accenture’s Volcker Delivery Framework
Rule
Interpretation
Internal Control Framework
• Identified gaps in key
capabilities required to
allow Volcker
• Leveraged shiftin degree
of compliance to allow
firm’s strategic outcomes
• Defined requirements
for desk operations in
compliance with
Volcker
• Alignmentof Command
Center functionality
with desk operations
• Facilitate behavioral
change managementto
realign employees
• Independenttesting to
evaluate and monitor
employee alignmentwith
new requirements
Capability Architecture
Capabilities Activation
Roadmap
Target Operating Model
Policies and Procedures
Manual
Requirements Document
Internal Control Framework
Desk Metric Reporting
Desk Requirements
Document
Dashboard / Command Center
Analytics, Reporting, and Data
Requirements Document
Change Impact Assessment
Communications / Training Plan
Behavior Change Framework
Stakeholder Mapping
Management Framework
Internal Control Inventory
• Developed limits and
usage definitions
• Revised escalation and
response procedures
• Streamlined operational
and compliance metrics
• Defined requirements for
analytics and reporting
• Built and developed
dashboard thatmeets the
capabilityrequirements
• Configured metrics reporting
• Establish governance
requirements earlier in
Compliance Pillars to
promote effective
ongoing monitoring of
compliance in final
stage of maturity
Not Mandatory for
Moderate Institutions
The implementation roadmap buildsthe capabilities requiredfor SignificantInstitutions and can be adjustedfor ModerateInstitutions
14

OUR TEAM AND CONTACTS
To find out more
Contact us
https://www.linkedin.com/sho
wcase/16183502
https://twitter.com/Acc
entureFSRisk
Hamish Wynn
Managing Director,Accenture Finance & Risk,
Regulatory Remediation& Compliance Transformation
hamish.wynn@accenture.com
Albert Janer Becerra
Manager, Accenture Finance & Risk,
albert.janer.becerra@accenture.com
SamanthaRegan
Managing Director,Accenture Finance & Risk,
samantha.regan@accenture.com
Usman Raj
Senior Manager, Accenture Finance & Risk,
usman.raj@accenture.com
AccentureFinance& Risk:
https://www.accenture.com/us-en/financial-services-finance-risk
AccentureFinance& Risk Blogs:
http://financeandriskblog.accenture.com/homepage/
15
Authors
Usman Raj
Amandeep Chhina
Contributors
Gaurav Kapoor
Albert Janer Becerra
Andrey Kushnirsky
Rosie Fan
Authors
References
Debevoise & Plimpton – Volcker Rule: Version 2.0
https://www.debevoise.com/insights/publications/2019/08/v
olcker-rule-version-2-final-rule-round-1
Cleary Gottlieb – Agencies Finalize Elements of Volcker 2.0
https://www.clearygottlieb.com/-/media/files/alert-memos-
2019/agencies-finalize-elements-of-volcker-20.pdf
FDIC – Final Volcker Rule
https://www.fdic.gov/news/board/2019/201
9-08-20-notice-dis-a-fr.pdf

Copyright © 2020 Accenture. All rights reserved.Copyright © 2020 Accenture. All rights reserved.
VOLCKER RULE: CALIBRATION TO 2.0
PRELIMINARY IMPACT ANALYSIS
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