Regulators Consider Watering Down Volcker Rule Even More

WASHINGTON (Reuters) - U.S. bank regulators said on Friday they would consider exempting certain complex securities from the so-called Volcker rule after community banks sued the agencies, warning of massive losses.

Four agencies said they were reviewing the exclusion collateralized debt obligations backed by trust preferred securities - or TruPS-backed CDOs - from the rule, which limits banks' ownership of funds.

A group of smaller banks argued in court this week that these were common instruments, and that they faced $600 million in losses this quarter already even if they had to sell the securities only at a much later date.

"The accounting staffs of the agencies believe that ... any actions in January 2014 that occur before the issuance of December 31, 2013, financial reports should be considered when preparing those financial reports," the agencies said in a joint statement.

(Reporting by Douwe Miedema)