Five US Agencies (CFTC, FDIC, FED, OCC, and SEC) announced that they are coordinating their respective reviews of the treatment of certain foreign funds under the Volcker Rule (section 619 of the Dodd-Frank Act), along with the agencies' implementing regulations. These foreign funds are investment funds organized and offered outside of the United States that are excluded from the definition of "covered fund" under the agencies' implementing regulations. FDIC, FED, and OCC have also issued a statement on the treatment of certain foreign funds under the rules implementing Section 13 of the Bank Holding Company Act.
Section 619, and the implementing regulations, generally do not apply to investments in, or sponsorship of, these foreign excluded funds by a foreign banking entity. However, complexities in the statute and the implementing regulations may result in certain foreign excluded funds becoming subject to regulation under section 619 because of governance arrangements with or investments by a foreign bank. Therefore, a number of foreign banking entities, foreign government officials, and other market participants have expressed concern about possible unintended consequences and extraterritorial impact. The staff of the agencies are considering ways in which the implementing regulations may be amended, or other appropriate action may be taken. Congressional action might be necessary to fully address the issue. To aid full consideration, the federal banking regulators, which generally oversee foreign banks, announced that they would not take action under section 619 for qualifying foreign excluded funds, subject to certain conditions, for a period of one year.
Section 619 generally prohibits insured depository institutions and any company affiliated with an insured depository institution from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a covered fund. These prohibitions are subject to a number of statutory exemptions, restrictions, and definitions. Final regulations implementing section 619 were issued by these five agencies. This announcement does not otherwise modify the rules implementing section 619 and is limited to certain foreign excluded funds that may be subject to the Volcker Rule and implementing regulations due to their relationships with or investments by foreign banking entities.
Keywords: Americas, United States of America, US Agencies, Dodd Frank Act, Volcker Rule, Foreign Funds, Banking, Securities
Previous ArticleHKMA Announces Increase in Jurisdictional CCyB Ratio for Hong Kong
PRA published a set of questions and answers (Q&A) covering common queries regarding residential and commercial property valuations, for the purpose of the Capital Requirements Regulation (CRR), during the period of disruption caused by COVID-19 pandemic.
EBA published guidelines on loan origination and monitoring, which bring together prudential standards and consumer protection obligations, along with the anti-money laundering and the Environmental, Social, and Governance (ESG) considerations.
EBA published a report on convergence of supervisory practices in 2019.
EBA published a consultation paper on the draft amended regulatory technical standards on own funds and eligible liabilities.
IOSCO proposed updates to its principles for regulated entities that outsource tasks to service providers.
MAS announced that the first phase of the Veritas initiative will commence with the development of fairness metrics in credit risk scoring and customer marketing.
BoE published the Statistical Notice 2020/4 to update the buy-to-let (BTL) Phase 2 and Phase 3 definitions for the Interest Rate Type data item.
FSI published a brief note that examines challenges facing the banking sector as a result of the payment deferral programs put in place to support borrowers affected by the COVID-19 pandemic.
RBNZ published the financial stability report for May 2020. This review of the financial system in the country highlights that the economic disruption associated with COVID-19 will present challenges to the financial system.
PRA published the policy statement PS14/20, which contains the supervisory statement SS1/20 and the feedback to responses to the consultation paper CP22/19 on expectations for investment by firms in accordance with the Prudent Person Principle, or PPP, as set out in the Investments Part of the PRA Rulebook.