Requiring banking entities to implement required compliance programs by the effective date is unreasonable

Bank of America, like other banking entities, has already made substantial efforts toward aligning its businesses with the requirements of the Volcker Rule as they appear in the statute. First and foremost, Bank of America has exited its stand-alone proprietary trading business. It has also discontinued making proprietary investments in hedge funds and private equity funds intended to be covered by the Volcker Rule’s prohibition on sponsoring or maintaining an ownership in such funds, and commenced executing transactions to sell its interests in such funds as market opportunities arise.

The Proposal, however, requires that a banking entity will “have developed and implemented the required [compliance] program by the proposed effective date,”140 _{July 21,} 2012. Under the Proposal’s compliance provisions, a banking entity must, among many other things:

 create an enterprise-wide policy, which can be done only when final rules are adopted, that is acceptable to Bank of America Corporation’s Board of Directors, which must adopt it;

 map all its “trading units” (e.g., any desk that purchases and sells instruments subject to the Volcker Rule) and “asset management units” (e.g., any unit that sponsors or maintains an ownership interest in a covered fund”); 141

 establish the permissible strategies and instruments for each trading unit;

 identify the personnel authorized to engage in the activities for each trading or asset management unit;

140 _{See Preamble, 76 Fed. Reg. at 68,855.}

141 _{At the present time, it is not clear to Bank of America how it would draw such a map of its asset} management units, since under the Proposal’s definition of “covered fund” virtually any subsidiary, regardless of the activities in which it engages, will be a “covered fund.”

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 draw clear, documented “Volcker” supervisory management lines;

 create the systems and processes, including through substantial technology development, to capture certain quantitative metrics for all activities conducted pursuant to the underwriting and risk-mitigating hedging permitted activities exceptions and seventeen quantitative metrics for all market making-related permitted activities;

 create an enterprise-wide system to capture every “covered fund” operating under the asset management exception and conduct the calculations to monitor compliance to assure that individually each fund meets the 3 percent fund de minimis requirement and that all such funds, in the aggregate, do not exceed 3 percent of Bank of America’s Tier 1 capital;

 create, document and implement the written plan required in connection with reliance on the asset management exception;

 review its compensation policies enterprise-wide to make sure that such policies fulfill the requirements of the Volcker Rule;

 establish a compliance program to monitor the policies and procedures once adopted; and

 create relevant audit programs to test the sufficiency of policies and procedures against the requirements of the final rules.

We submit that even if the final rules implementing the Volcker Rule were in place today and no uncertainty or ambiguity existed regarding their requirements, in light of the complexity and magnitude of the changes that the Volcker Rule will require, the required compliance program could not be created and fully and appropriately implemented within the six months that remain until effectiveness (July 21, 2012). The reality is that, even in the best-case scenario, final rules will not be issued until shortly before the effective date, making establishment of the compliance program contemplated by the Proposal impossible.

Recommendations

While only Congress can change the effective date of the Volcker Rule, the statute contemplates a two-year conformance period, up to three one-year extensions, and a special extension for illiquid funds. We request that the Agencies grant (via their authority to establish a reasonable conformance period) banking entities sufficient time to establish compliance programs and otherwise implement the requirements of the final rules in a manner that is consistent with congressional intent that the Volcker Rule be implemented so as to “minimize market disruption while still steadily moving firms away from the risks of the restricted activities.”142 _{Specifically, we recommend that the Agencies:}

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 expressly provide in the final rules that all banking entities will have one year from the issuance of the final rules to establish the core compliance program required by the Proposal and a second year for testing of the program;

 provide for a one-year period during which the Agencies will determine with banking entities which metrics will be employed for different asset classes with relation to the relevant factors under each exception and an additional twelve- month period during which such metrics could be reviewed—so that these metrics would be required as a component of a banking entity’s compliance program no sooner than two years after the issuance of the final rules; and

 given the complexity of these requirements, consider providing extensions of these periods under specified circumstances, consistent with congressional intent.

3. A single Agency should exercise interpretive authority and all supervisory