in february, i expressed the hope that we would complete the volcker rule by the end of this year. since that time, there has been good interagency progress, and i maintain both the hope and expectation of five months ago. the derivatives push - out provision in section 716 of the dodd - frank act generally prohibits the provision of federal assistance, such as fdic deposit insurance or federal reserve discount window credit, to swap dealers and major swap participants. the provision becomes effective on july 16, 2013, although the statute provides insured depository institutions the right to request a two - year extension from their primary federal supervisor. last month, the federal reserve issued an interim final rule that clarified that uninsured u. s. branches and agencies of foreign banks will be treated in the same manner as insured depository institutions under section 716 and, as a result, will qualify for the same exemptions and two - year transition period available by statute to u. s. insured depository institutions. the interim final rule also establishes the process for state member banks and uninsured state branches or agencies of foreign banks to apply to the federal reserve for transition relief. 4 although the rule is already effective, we are seeking comments on it and will revise the rule, as necessary, in light of comments received. oversight of community banks in addition to overseeing large banking firms, the federal reserve supervises approximately 800 state - chartered community banks that are members of the federal reserve system. 5 community banks play an important role in extending credit in local economies across the country – particularly, though by no means only, in their lending to small and medium - sized businesses. recognizing the disproportionate burden that regulatory compliance can impose on smaller institutions, the federal reserve has put in place special processes for taking account of the circumstances and more limited compliance resources of community banks, while still achieving safety - and - soundness aims. we created a special subcommittee of our regulatory and supervisory oversight committee to review all proposals with an eye to their effects on community banks. we have also established a community depository institutions advisory council to enable community bankers to comment on the economy, lending conditions, supervisory policies, and other matters of interest. the changes we will be seeing in the financial regulatory architecture as a result of the doddfrank act and basel iii are principally directed at our largest and most complex financial firms. many of the basel iii requirements will not apply to smaller banks – including the countercy

. banking system by setting strict eligibility criteria for regulatory capital instruments, by raising the minimum tier 1 capital ratio from 4 percent to 6 percent of risk - weighted assets, and by establishing a new minimum common equity tier 1 capital ratio of 4. 5 percent of risk - weighted assets. the rules also require a capital conservation buffer of 2. 5 percent of risk - weighted assets to ensure that banking organizations build capital during benign economic periods so that they can withstand serious economic downturns and still remain above the minimum capital levels. in addition, the rules improve the methodology for calculating risk - weighted assets to enhance risk sensitivity and incorporate certain provisions of the dodd - frank act, see www. federalreserve. gov / newsevents / press / bcreg / 20130702a. htm. bis central bankers ’ speeches such as sections 171 and 939a. 2 the rules also contain certain provisions, including a supplementary leverage ratio and a countercyclical capital buffer, that apply only to large and internationally active banking organizations, consistent with their systemic importance and their complexity. the rules will have several important consequences. first, they consolidate the progress made by banks and regulators over the past four years in improving the quality and quantity of capital held by banking organizations. second, they remedy shortcomings in our existing generally applicable risk - weighted asset calculations that became apparent during the financial crisis. in so doing, they also enhance the effectiveness of the collins amendment, the scope of which we have extended through these rules by applying standardized floors to capital buffer, as well as minimum requirements. third, adoption of these rules meets international expectations for u. s. implementation of the basel iii capital framework. this gives us a firm position from which to press our expectations that other countries implement basel iii fully and faithfully. in crafting these rules, the banking agencies made a number of changes to the 2012 proposals, mostly to address concerns by community banks. for example, the new rules maintain current practice on risk weighting residential mortgages and provide community banking organizations the option of maintaining existing standards on the regulatory capital treatment of “ accumulated other comprehensive income ” ( aoci ) and pre - existing trust preferred securities. these changes from the proposed rule are meant to reduce the burden and complexity of the rules for community banks while preserving the benefits of more rigorous capital standards. most banking organizations already meet the higher capital standards, and the rules will help preserve the benefits of the stronger capital positions banks have built under the oversight