US Agencies (CFTC, FDIC, FED, OCC, and SEC) are proposing to amend the regulations implementing the Bank Holding Company Act's (BHC Act) prohibitions and restrictions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds. The proposed amendments are consistent with the statutory amendments made pursuant to certain sections of the Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCP Act). Comments for this consultation must be received on or before March 11, 2019 while comments on the Paperwork Reduction Act burden estimates must be received on or before April 09, 2019.
Section 13 of the Bank Holding Company Act of 1956, also known as the Volcker Rule, generally prohibits any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund, subject to certain exemptions. The EGRRCP Act, enacted on May 24, 2018, amended section 13 of the BHC Act by modifying the definition of a “banking entity,” to exclude certain small firms from section 13's restrictions and by permitting a banking entity to share a name with a hedge fund or private equity fund that it organizes and offers under certain circumstances. The authority for developing and adopting regulations to implement the prohibitions and restrictions under Section 13 of the BHC Act is shared among the US Agencies. The US Agencies are now proposing to amend the regulations implementing section 13 of the BHC Act in a manner consistent with the statutory amendments made by EGRRCP Act. The statutory amendments in this proposed rule:
- Exclude from these restrictions certain firms that have total consolidated assets equal to USD 10 billion or less and total trading assets and liabilities equal to 5% or less of total consolidated assets
- Amend the restrictions applicable to the naming of a hedge fund or private equity fund to permit an investment adviser that is a banking entity to share a name with the fund under certain circumstances
The proposal would not change the current reporting, recordkeeping, or third-party disclosure requirements associated with section 13 of the BHC Act under the Paperwork Reduction Act. However, the proposal would exempt small entities supervised by the Agencies from the reporting, recordkeeping, and all other requirements associated with section 13 of the BHC Act.
Related Link: Proposed Rule in Federal Register
Comment Due Date: March 11, 2019/April 09, 2019
Keywords: Americas, US, Banking, Securities, Volcker Rule, EGRRCP Act, BHC Act, Proprietary Trading, US Agencies
Previous ArticleEP Report Compares Resolution and Liquidation Framework in EU and US
FCA and PRA in the UK, FED in the US, and the authorities in Singapore have fined Goldman Sachs for risk management failures in connection with the 1Malaysia Development Berhad (1MDB).
BCBS announced that OSFI and the Bank of Canada hosted the 21st International Conference of Banking Supervisors (ICBS) virtually on October 19-22, 2020.
FCA proposed guidance on how firms should continue to seek to help customers who hold insurance and premium finance products and may be in financial difficulty because of COVID-19, after October 31, 2020.
EBA issued an opinion on prudential treatment of the legacy instruments as the grandfathering period nears an end on December 31, 2021.
ESRB published the fifth issue of the EU Non-bank Financial Intermediation Risk Monitor 2020 (NBFI Monitor).
HM Treasury announced that the new Financial Services Bill has been introduced in the Parliament.
APRA announced that it has increased the minimum liquidity requirement of Bendigo and Adelaide Bank for failing to comply with the prudential standard on liquidity.
PRA published the consultation paper CP17/20 to propose changes to certain rules, supervisory statements, and statements of policy to implement elements of the Capital Requirements Directive (CRD5).
US Agencies adopted a final rule that applies to advanced approaches banking organizations and aims to reduce interconnectedness in the financial system as well as to reduce contagion risks associated with the failure of a global systemically important bank (G-SIB).
US Agencies (FDIC, FED, and OCC) adopted a final rule that implements the net stable funding ratio (NSFR) for certain large banking organizations.