U.S. regulators will grant banks an exemption from Volcker Rule limits for collateralized debt obligations (CDOs)composed mostly of small-bank securities, according to a statementfrom regulators today.

The adjustment to the rule would allow banks to keep CDOs backedby trust-preferred securities (TruPS) established before May 19,2010, and obtained by Dec. 10, 2013, five financial agencies saidin a joint news release.

After regulators approved theVolcker Rule on Dec. 10, smaller U.S. banks said it could forcethem to take as much as $600 million in losses on certain CDOs heldby about 300 firms. U.S. regulators said they would considerexempting the securities and set tomorrow as the deadline.

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