Alert July 19, 2011

GAO Issues Report Stating Bank Regulators Will Need More Information from Banks to be Able to Enforce Volcker Rule in Effective Manner

The General Accountability Office (the “GAO”) issued a report (the “Report“) concluding that bank regulators will need more information from banks than is currently available to be able to enforce the Volcker Rule effectively.  The Volcker Rule, Section 619 of the Dodd‑Frank Act, is designed to restrict the trading activities of depository institutions (“DIs”) for their own account (rather than for customers) and to limit DIs’ ownership and sponsorship of hedge funds and private equity funds.  The GAO concluded in the Report that while it was possible to measure trading activities of a proprietary stand‑alone trading desk, information on DIs’ other proprietary trading activities is extremely difficult or impossible to measure because DIs do not maintain records of such activities.  The banking regulatory agencies are required to adopt regulations under the Volcker Rule by October 2011, but DIs will not be required to comply with the Volcker Rule for two years after the regulations are adopted.