"It was the banking regulators and not the market regulators who put out the FAQ. So you are putting the banks between two agencies, since the SEC requires financial reports to be done per [generally accepted accounting principals, or] GAAP, while the banking regulators have given the banks less than two weeks to figure it out," he adds.
Because of the banks' GAAP reporting requirements, the ABA in its court complaint said the agencies solution of having banks possibly restructure their CDOs backed by trust preferred securities so that they would not be considered "covered funds" under Vocker, is "no solution at all."
When the Volcker Rule was being touted before Dodd-Frank was signed by President Obama in July 2010, supporters said the rule was meant to curb the excess risks of the largest banks, while not hurting small community banks. This is what is "offensive" to Kaplan, who adds, "not only does it affect them, the consequences are so great, it can put some of them out of business."
The Federal Reserve, OCC and FDIC have until Monday to respond in court to the ABA's demand, which is cutting things rather close for year-end accounting decisions.