Featured Product

    US Agencies Propose to Amend Covered Fund Provisions of Volcker Rule

    January 30, 2020

    US Agencies (CFTC, FDIC, FED, OCC, and SEC) are proposing to amend the regulations implementing Section 13 of the Bank Holding Company Act (Volcker Rule). The proposal would modify the restrictions for banking entities investing in, sponsoring, or having certain relationships with covered funds. Comments must be received on or before April 01, 2020. Additionally, FED has published statements by Chair Jerome H. Powell, Vice Chair for Supervision Randal K. Quarles, and Governor Lael Brainard on the proposed rule. Ms. Brainard does not support the proposal and is concerned that several of the proposed changes will weaken core protections in the Volcker rule and enable banking firms again to engage in high-risk activities related to covered funds.

    The proposed rule would improve and streamline the covered funds portion of the rule, address the treatment of certain foreign funds, and permit banking entities to offer financial services and engage in other permissible activities that do not raise concerns that the Volcker rule was intended to address. In particular, it would:

    • Limit the extraterritorial impact of the rule on foreign funds offered by foreign banks to foreign individuals
    • Permit certain low-risk transactions (including intraday credit and payment, settlement and clearing transactions) between a banking entity and covered funds for which the banking entity serves as investment adviser or sponsor
    • Simplify existing provisions of the rule related to foreign public funds, loan securitizations, and small business investment companies
    • Permit banking entities to invest in or sponsor certain types of funds that do not raise the concerns the Volcker Rule was intended to address, such as credit funds, venture capital funds, customer facilitation funds, and family wealth management vehicles
    • Clarify that credit exposures to a covered fund would generally not constitute fund ownership interests under the Volcker Rule
    • Clarify an ambiguity from the 2013 rulemaking about the treatment of parallel investments made by a banking entity in the same underlying investments as a sponsored covered fund

    The Volcker Rule contains certain restrictions on the ability of a banking entity or non-bank financial company supervised by FED to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund. The rule prohibits any banking entity from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a covered fund, subject to certain exemptions. The Volcker Rule defines a covered fund as an issuer that would be an investment company as defined in the Investment Company Act of 1940 but for section 3(c)(1) or 3(c)(7) of that Act, or such similar funds as the agencies by rule determine. The regulations implementing the Volcker Rule define covered fund by including the statutory definition as well as certain additions (for example, commodity pools that are not publicly offered) and exclusions (such as foreign public funds). Since adoption of the implementing regulations in 2013, opportunities have been identified, consistent with the statute, for revising the regulations to improve, streamline, and clarify the covered fund provisions.

     

    Related Links

    Comment Due Date: April 01, 2020

    Keywords: Americas, US, Banking, Securities, Volcker Rule, Securitization, Covered Fund Restrictions, US Agencies

    Related Articles
    News

    EBA Updates List of Validation Rules for Reporting by Banks

    EBA issued a revised list of validation rules with respect to the implementing technical standards on supervisory reporting.

    September 10, 2020 WebPage Regulatory News
    News

    EBA Responds to EC Call for Advice to Strengthen AML/CFT Framework

    EBA published its response to the call for advice of EC on ways to strengthen the EU legal framework on anti-money laundering and countering the financing of terrorism (AML/CFT).

    September 10, 2020 WebPage Regulatory News
    News

    NGFS Advocates Environmental Risk Analysis for Financial Sector

    NGFS published a paper on the overview of environmental risk analysis by financial institutions and an occasional paper on the case studies on environmental risk analysis methodologies.

    September 10, 2020 WebPage Regulatory News
    News

    MAS Issues Guidelines to Promote Senior Management Accountability

    MAS published the guidelines on individual accountability and conduct at financial institutions.

    September 10, 2020 WebPage Regulatory News
    News

    APRA Formalizes Capital Treatment and Reporting of COVID-19 Loans

    APRA published final versions of the prudential standard APS 220 on credit quality and the reporting standard ARS 923.2 on repayment deferrals.

    September 09, 2020 WebPage Regulatory News
    News

    SRB Chair Discusses Path to Harmonized Liquidation Regime for Banks

    SRB published two articles, with one article discussing the framework in place to safeguard financial stability amid crisis and the other article outlining the path to a harmonized and predictable liquidation regime.

    September 09, 2020 WebPage Regulatory News
    News

    FSB Workshop Discusses Preliminary Findings of Too-Big-To-Fail Reforms

    FSB hosted a virtual workshop as part of the consultation process for its evaluation of the too-big-to-fail reforms.

    September 09, 2020 WebPage Regulatory News
    News

    ECB Updates List of Supervised Entities in EU in September 2020

    ECB updated the list of supervised entities in EU, with the number of significant supervised entities being 115.

    September 08, 2020 WebPage Regulatory News
    News

    OSFI Identifies Focus Areas to Strengthen Third-Party Risk Management

    OSFI published the key findings of a study on third-party risk management.

    September 08, 2020 WebPage Regulatory News
    News

    FSB Extends Implementation Timeline for Framework on SFTs

    FSB is extending the implementation timeline, by one year, for the minimum haircut standards for non-centrally cleared securities financing transactions or SFTs.

    September 07, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 5796