Featured Product

    US Agencies Amend Covered Fund Provisions of Volcker Rule

    June 25, 2020

    US Agencies (CFTC, FDIC, FED, OCC, and SEC) finalized a rule modifying the Volcker rule's prohibition on banking entities investing in or sponsoring hedge funds or private equity funds—known as covered funds. The final amendments are intended to improve and streamline the regulations implementing section 13 of the Bank Holding Company Act by modifying and clarifying requirements related to the covered fund provisions of the rules. The rule will be effective on October 01, 2020.

    The final rule is similar to the proposal, with certain targeted adjustments, and it modifies three areas of the Volcker Rule by

    • Streamlining the covered funds portion of rule
    • Addressing the extraterritorial treatment of certain foreign funds
    • Permitting banking entities to offer financial services and engage in other activities that do not raise concerns that the Volcker rule was intended to address

    Under the final rule, qualifying foreign excluded funds are not required to have compliance programs or comply with the reporting and additional documentation requirements. However, any banking entity that owns or sponsors a qualifying foreign excluded fund will still be required to have in place appropriate compliance programs for itself and its other subsidiaries and provide reports and additional documentation as required. In a statement accompanying this rule, the FED Governor Lael Brainard said: "I supported exempting community banks from the Volcker rule, and I support addressing the unintended application of the Volcker rule to certain funds organized outside of the United States and offered to foreign investors, known as foreign excluded funds. However, I am concerned key changes in the final rule weaken core protections in the Volcker Rule and will permit banking entities to return to risky activities seen in the 2008 financial crisis."

    The Volcker rule generally prohibits banking entities from engaging in proprietary trading and from acquiring or retaining ownership interests in, sponsoring, or having certain relationships with a hedge fund or private equity fund. The rule contains certain restrictions on the ability of a banking entity or a 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 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

    Effective Date: October 01, 2020

    Keywords: Americas, US, Banking, Volcker Rule, Securitization, Covered Funds Restrictions, BHC Act, US Agencies

    Related Articles
    News

    PRA to Elaborate on Approach to Transposition of CRD5 by Mid-December

    PRA published a statement that explains when to expect further information on the PRA approach to transposing the Capital Requirements Directive (CRD5), including its approach to revisions to the definition of capital for Pillar 2A.

    November 30, 2020 WebPage Regulatory News
    News

    EIOPA Consults on KPIs on Sustainability for Non-Financial Reporting

    EIOPA is consulting on the relevant ratios to be mandatorily disclosed by insurers and reinsurers falling within the scope of the Non-Financial Reporting Directive as well as on the methodologies to build these ratios.

    November 30, 2020 WebPage Regulatory News
    News

    SRB Sets Out Work Program for 2021-2023

    SRB published the work program for 2021-2023, setting out a roadmap to further operationalize the Single Resolution Fund and to achieve robust resolvability of banks under its remit over the next three years.

    November 30, 2020 WebPage Regulatory News
    News

    ECB Publishes Guide on Management of Climate and Environmental Risks

    ECB finalized guidance on the way it expects banks to prudently manage and transparently disclose climate and other environmental risks under the current prudential rules.

    November 27, 2020 WebPage Regulatory News
    News

    BCBS Amends Capital Treatment of Non-Performing Loan Securitizations

    BCBS published a technical amendment to the capital treatment of securitizations of non-performing loans by banks.

    November 26, 2020 WebPage Regulatory News
    News

    BoE to Move Statistical Data Collection to BEEDs Portal

    BoE announced that the Data and Statistics Division is planning to move collection of statistical data to the BoE Electronic Data Submission (BEEDS) portal.

    November 25, 2020 WebPage Regulatory News
    News

    APRA Updates Reporting Standards and Guidance for EFS Data Collection

    APRA published the updated reporting standards and guidance for the collection of Economic and Financial Statistics (EFS), following a consultation process. Also published was a response letter to the feedback received on the proposal for amending the EFS reporting standards and guidance.

    November 24, 2020 WebPage Regulatory News
    News

    EC Consults on Criteria for Environmentally Sustainable Activities

    EC is consulting on a draft delegated regulation to supplement the Taxonomy Regulation (2020/852) by establishing the technical screening criteria for determining the conditions under which an economic activity qualifies as environmentally sustainable.

    November 20, 2020 WebPage Regulatory News
    News

    IFRS Examines Incorporation of Climate Risk Issues into IFRS Standards

    The IFRS Foundation published material highlighting the ways in which existing requirements in IFRS standards require companies to consider climate-related matters when their effect is material to the financial statements.

    November 20, 2020 WebPage Regulatory News
    News

    FSB Report Outlines Progress on Interest Rate Benchmark Reform

    FSB published a progress report on the implementation of reforms to major interest rate benchmarks, including the London Inter-bank Offered Rate (LIBOR) benchmark.

    November 20, 2020 WebPage Regulatory News
    RESULTS 1 - 10 OF 6167