Key considerations for developing a robust independent testing plan for Volcker Rule compliance.
While it would be fair to say that banking institutions subject to the Volcker Rule (the Rule) have conducted varying degrees of independent testing with respect to the effectiveness of their Rule compliance program over the past 18 months (i.e., since the conformance period end date of July 21, 2015), not all institutions have given adequate consideration toward developing a formal and robust independent testing plan that demonstrates how their Qualified Independent Party (QIP) would provide a program of assurance with respect to the banking institution’s compliance with the Rule.
While we acknowledge that the Rule by itself does not have an explicit requirement to develop such a planning document; we do, however, believe that such a formal document is critical both from an internal and external (regulatory) perspective. In this report, we discuss certain key considerations that institutions may want to reflect on as they review and enhance their existing planning documentation specific to the Rule’s independent testing.
Ten key items to consider
- Objectives of independent testing
- Scope of independent testing
- Who may perform independent testing
- Adherence to testing standards
- Testing approach
- Evaluating the results of independent testing
- Reporting independent testing results
- Limitations of the effectiveness of independent testing
- Relationship of the CEO review and attestation/sub-attestations to independent testing
- Recordkeeping and retention of testing program documentation