Agencies Take Steps to Address Volcker Rule Implementation Problems

The federal banking agencies last week began taking steps to address certain challenges with implementing the Volcker Rule. On Friday they announced additional time for foreign banks to address certain foreign funds that may have been unintentionally covered under Volcker, and today the Federal Reserve announced guidelines for how banks can seek extensions for certain kinds of investments in hedge funds and private equity.

Friday’s action provides a conformance period until July 21, 2018, during which agencies will not take action against foreign banking entities based on whether the activities and investments of a qualifying foreign excluded fund are attributed or connected to the foreign bank. Under today’s guidelines, the Fed said that banks seeking an up-to-two-year extension of the requirement to conform certain “seeding” investments in hedge funds and private equity funds may apply to their local Federal Reserve Bank, which has been delegated authority to approve but not deny these requests.

While some changes depend on legislation in Congress, regulators have in recent months signaled their willingness to address Volcker Rule concerns. As it did in its recent white paper on the Volcker Rule, the American Bankers Association continues to advocate with Congress and regulatory agencies for changes to improve the effectiveness of Volcker. For more information, contact ABA’s Cecelia Calaby.