Interview with William Meehan, Executive Director, Capital Markets Trading Compliance at CIBC
The Volcker rule was published in December 2013 by US regulators and requires banks with over $10B trading assets and liabilities to prove that they are not participating in proprietary trading through the reporting requirements. It is a new regulation which has limited guidance from the regulators, causing confusion among banks. At the current time, the main focus for banks is to better understand the Volcker rule and learn how to efficiently collect and analyze data in order to comply with the regulation before the deadline.
Mr. Meehan, Executive Director, Capital Markets Trading Compliance at CIBC recently spoke with GFMI about key topics to be discussed at their upcoming Strategic and Operational Challenges within Volcker Rule Compliance Conference, March 9-11, 2015 in New York, NY.
What are the key challenges surrounding Volcker implementation at the moment?
WM: Building new metrics, identifying ownership of monitoring processes (Compliance, Risk, Business, other), training personnel and finalizing policies and procedures.
How does the Volcker rule affect foreign institutions operating in the US?
WM: If you’re operating in the US, you will be subject to one or more of the 5 US regulatory agencies that passed the Volcker rule. So you will have to comply just like US banks of similar size as your institution. There is an exemption for trading foreign government obligations but that is not necessarily sufficient for a global bank that trades the debt of its home country (France) but also trades in debt of nearby countries where it has a large presence (England). So another exemption will be needed to continue in the business of proprietarily trading those foreign debt obligations. Of course there is always cross border cultural issues when US regulations go beyond US borders and affects the trading of foreign operations when the company is not a US company.
What are the implications for smaller and community banks?
WM: Volcker is not a one size fits all regulation as the regulators devised tiered compliance programs based on the size of a banks’ Total Consolidated Assets and Gross Trading Assets and Liabilities. Smaller banks only need to have a Standard Compliance program versus the Enhanced Compliance program for the bigger banks that are over $50 billion in total US consolidated assets. This means smaller banks (under $50 million) don’t need a CEO attestation and other Board and Senior Management escalation and accountability provisions. Also, banks under $10 billion in trading assets and liabilities do not need to build metrics until December 2016. Even then, they only have to produce upon request—providing a great deal of extra time to comply. However, if they will be using exemptions such as Underwriting, Market Making or Risk Mitigating hedging, they will need to build a few metrics to have evidence that they meet the requirements of the exemption come June of 2015. Smaller Technology, Risk Management and Compliance staffs make this challenging but the amount of trading desks that are in scope and the complexities of those trading desks and products should be equally reduced.
Some really small banks may even qualify for the less restrictive Simplified Compliance Program which involves adding references to the regulation in their existing policies and procedures. Lastly, banks that do not engage in covered activities (proprietary trading and investment in a hedge fund) do not need to establish a compliance program which was a change in response to concerns from community banks to the Proposed Rule which contained more burdensome requirements for such banks.
Do you believe that meeting reporting and compliance deadlines is a more difficult task for foreign and smaller institutions?
WM: I don’t believe whether you are foreign or US is a factor. Some foreign banks have such a large footprint and large staffs that they can handle the reporting and compliance deadlines just as easily as the big US banks. Smaller banks or banks that did not already have in place a robust and scalable footprint of the Volcker requirements will have a bigger implementation challenge in the technology, resourcing and procedures areas.
What would you gain from attending this conference?
WM: A better understanding of how firms are dealing with specific implementation challenges. Where are firms in terms of meeting the deadlines and what deadlines may be delayed. What, if any, parts of Volcker may be up for legislative or regulatory relief prior to the deadlines.
This GFMI conference provides financial institutions with the opportunity to better understand the Volcker rule and develop strategies in order to build compliance programs and meet compliance deadlines. On site, heads of Volcker Compliance, Dodd-Frank and Trading Compliance from financial institutions will be able to clarify ambiguous elements of the rule, overcome their own operational challenges and manage data after its collection.
Bill Meehan is an Executive Director of Capital Markets Compliance at CIBC World Markets, Corp. and Co-Editor of OTC Derivatives Regulation Under Dodd Frank, a practitioner’s guide covering all aspects of Dodd Frank swap regulations In his current role at CIBC, Mr. Meehan is responsible for Dodd Frank Volcker and Swap Dealer regulations in addition to providing multi-asset coverage of the sales, trading and syndicate desks for Equities, Fixed Income, FX and Commodities. Prior to his current role , Mr. Meehan was the Head of Equities Compliance at MF Global Inc. Prior to that, he worked at Bank of America Merrill Lynch in a senior Equity Derivatives Compliance role.
Mr. Meehan is a member of the SIFMA Equity Markets &Trading Committee, the SIFMA Swap Dealer Committee and the Cross Border Working Group. He holds the following FINRA licenses, Series 3,4,7,24 and 87. Mr. Meehan earned his B.A. in Political Science from Saint Peter’s University where he was a Spur Honor Society recipient and received his J.D. from Fordham University Law School. He is a member of the State Bar of New York.
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