Dodd-Frank News Center

Fed provides information on seeking Volcker Rule extension for 'illiquid funds'

This story appeared in Bank Digest.

The Federal Reserve Board has announced additional details regarding how banking entities may seek an extension to conform their investments in a narrow class of funds that qualify as "illiquid funds" to the requirements of section 619 of the Dodd-Frank Act, commonly known as the Volcker Rule. According to a press release, the Fed expects that the illiquid funds of banking entities will generally qualify for extensions, though extensions may not be granted in certain cases--for example, where the banking entity has not demonstrated meaningful progress to conform or divest its illiquid funds, has a deficient compliance program under the Volcker Rule, or where the Fed has concerns about evasion. In a statement of policy, the Fed outlined a simplified and streamlined process for granting extensions of the holding period for illiquid funds. The Fed reiterated the process in SR 16-18.

Merkley objects to delayed implementation of Volcker Rule

This story appeared in Bank Digest.

Senator Jeff Merkley (D-Ore) has issued a statement regarding the Federal Reserve Board's announcement that it would delay implementation of a key part of the Volcker Rule until 2017. Section 619 of the Dodd-Frank Act generally prohibits banking entities from engaging in proprietary trading and from holding interests in, sponsoring, or maintaining some other relationships with hedge or private equity funds--a provision commonly called the Volcker Rule.

The Fed recently granted the final permitted broad-based extension of the deadline by which covered institutions must come into full compliance with these restrictions. According to Merkley, "It's time for our regulators to stop carving out loopholes from the Volcker Rule and instead draw clear, bright lines that protect our economy and separate hedge fund activities from traditional banking."

Fed extends Volcker Rule conformance period for last time

This story appeared in Bank Digest.

The Federal Reserve Board has granted the final permitted broad-based extension of the deadline by which banking entities must bring their trading activities and hedge and private equity fund activities into conformity with the restrictions imposed by the Dodd-Frank Act. Section 619 of the act generally prohibits banking entities from engaging in proprietary trading and from holding interests in, sponsoring, or maintaining some other relationships with hedge or private equity funds--a provision commonly called the Volcker Rule.

The newest extension is the third, and final, extension the Fed can allow, and it gives covered institutions until July 21, 2017, to come into full compliance. However, the Fed's release emphasized that the extension applies only to investments in prohibited hedge or private equity funds before Dec. 31, 2013, which are referred to as legacy covered fund investments. There is no extension for proprietary investment activities or investments made after Dec. 31, 2013. The full-compliance deadline for these investments was Dec. 31, 2015, the end of the first one-year extension.

Volcker Rule FAQs updated

This story appeared in Bank Digest.

The Federal Reserve Board has updated its Frequently Asked Questions regarding the application of section 13 of the Bank Holding Company Act of 1956, commonly referred to as the Volcker Rule, and regulations adopted by the Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and Commodity Futures Trading Commission. The Fed noted that while the FAQs apply to banking entities for which the Fed has jurisdiction under section 13 of the BHC Act, they have been developed by staffs of all five agencies.

The latest updates, FAQ Nos. 19 and 20, discuss the treatment of residual market-making positions upon the termination of market-making activity and the applicability of the restrictions in Section 13(f) of the Bank Holding Company Act.

Volcker Rule FAQs updated

This story appeared in Bank Digest.

The Federal Reserve Board has updated its Frequently Asked Questions regarding the application of section 13 of the Bank Holding Company Act of 1956, commonly referred to as the Volcker Rule, and regulations adopted by the Fed, Office of the Comptroller of the Currency, Federal Deposit Insurance Corporation, Securities and Exchange Commission, and Commodity Futures Trading Commission. The Fed noted that while the FAQs apply to banking entities for which the Fed has jurisdiction under section 13 of the BHC Act, they have been developed by staffs of all five agencies.

The latest updates, FAQ Nos. 17 and 18, discuss the application of the Volcker Rule to compliance for market making and the identification of covered funds and to CEO certification for prime brokerage transactions.

 

Fed revises FAQs on Volcker Rule

This story appeared in Bank Digest.

The Fed has revised its Frequently Asked Questions regarding the application of section 13 of the Bank Holding Company Act of 1956, commonly referred to as the Volcker Rule, and its implementing regulations. The latest FAQs (Nos. 14 and 15) address how the regulations apply to a foreign public fund sponsored by a banking entity; and whether an issuer, that would be a covered fund, may rely on the joint venture exclusion from the regulatory definition of covered fund.

Hoenig lists basic principles for financial supervision

This story appeared in Bank Digest.

In remarks presented to the Institute of International Bankers Annual Washington Conference, Federal Deposit Insurance Corporation Vice Chairman Thomas M. Hoenig focused on what he termed "a set of supervisory principles that when used effectively have historically proven most useful in assuring the presence of an industry deserving of our confidence."

• All commercial banking firms, not just small and mid-sized ones, should be subject to full-scope examinations.
• Because the largest banks are subsidized and affect the economy so significantly, they should be subject to greater disclosures regarding their financial condition.
• The Volcker Rule should be implemented--proprietary trading should be conducted outside the safety net, subject to market forces instead of government protection.
• Even the largest banking firms should fund and capitalize themselves at levels the market would demand if there was no public safety net.

Fed releases new Volcker FAQ

This story appeared in Bank Digest.

The Federal Reserve Board has released a new Frequently Asked Question (FAQ) interpreting the Volcker Rule. The latest FAQ discusses the application of the marketing restrictions to the "SOTUS covered fund exemption."

Volcker Rule FAQs updated

This story appeared in Bank Digest.

The Federal Reserve Board has added two new Frequently Asked Questions. One clarifies the 30-day metrics reporting during the conformance period. The second FAQ addresses whether interest-only and principal-only STRIPS of notes and bonds issued by the Treasury Department are permitted under the proprietary trading exception to the Volcker Rule regulations.

Warren and Cummings ask banks about swaps trading practices

This story appeared in Bank Digest.

Sen. Elizabeth Warren (D-Mass), Ranking Member of the Senate Subcommittee on Economic Policy, and Rep. Elijah E. Cummings (D-Md), Ranking Member of the House Committee on Oversight and Government Reform, sent letters to Bank of America, JPMorgan Chase, Citibank, and Goldman Sachs requesting information about how they will alter their swaps trading practices after a law passed in December that removed a key section of the Dodd-Frank Act. Section 630 of the 2015 Consolidated and Further Continuing Appropriations Act, which was signed by the President on Dec. 16, 2014, removed restrictions that had been enacted in the Dodd-Frank Act to limit risky trades.