Milbank Financial Institutions Regulatory partner Douglas Landy was quoted in a recent Yahoo Finance article titled “Congress May Have Accidentally Freed Nearly All Banks from the Volcker Rule.” The article discusses a few double negatives that were buried in legislative text, which could inadvertently free nearly all US banks from the Volcker Rule. A package bill passed in May contained a provision that exempts smaller community banks from the regulations of the Volcker Rule. However, some of the largest US banks are now considering challenging this interpretation, arguing that the bill could be read as also extending regulatory relief to banks far above $10 billion in assets.
Mr. Landy, former Federal Reserve Bank of New York lawyer, commented that the negatives could be interpreted as flipping the “and” in the statute to an “or.” “I think the language in the provision is confusing. It’s a double negative and if you add in the prior negative that says the term ‘insured depository institution,’ it really is a triple negative,” Mr. Landy said. “That makes it hard to interpret, which leaves the power of interpretation to the agencies.”
