ABA Supports Proposed Regulatory Reforms to Volcker Rule’s ‘Covered Funds’ Provisions

In a comment letter to the federal banking agencies today, the American Bankers Association supported a proposal to amend the “covered funds” and “Super 23A” regulatory provisions of the Volcker Rule. These provisions place significant restrictions on financial institutions’ ability to have certain interests in, or relationships with, hedge funds and private equity funds. ABA has long called for changes to these provisions, and in consultation with its banker-led Volcker Rule working groups, offered additional recommendations for further improving the proposal.

Among other things, the proposed changes would establish new qualifying exclusions for credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles, while simplifying several of the rule’s provisions related to foreign public funds, loan securitizations, and small business investment companies.

The proposal would also amend Super 23A to allow for intraday extensions of credit to related covered funds and give banking entities the flexibility to provide standard payment, clearing, and settlement services to such funds. Together, these changes would preserve traditional banking activities while enabling banks to promote capital formation that would benefit start-up businesses, local communities and the U.S. economy, ABA noted.