Regulators extend comment deadline for Volcker Rule changes
WASHINGTON — Regulators are giving the industry more time to comment on proposed revisions to the Volcker Rule dealing with banks' stakes in certain investment funds.
The proposal — which was put forth in January by five agencies including the Office of the Comptroller of the Currency, Federal Reserve and Federal Deposit Insurance Corp. — would revise the definition of a so-called covered fund. The plan would allow financial institutions to invest in funds that many stakeholders say were not meant to be the target of the Volcker Rule.
The comment period on that proposal was set to expire on Wednesday, but the regulators said Thursday they would welcome comments until May 1.
“The agencies will continue to consider comments to provide interested persons more time to analyze the issues and prepare their comments in light of potential disruptions resulting from the coronavirus,” the regulators said in a press release.
The original 2013 Volcker Rule — first proposed as an amendment to the Dodd-Frank Act by former Fed Chairman Paul Volcker — not only banned proprietary trading but also limited bank stakes in private-equity and hedge funds to prevent the type of short-term risky bets that helped precipitate the financial crisis.
But banking agencies sought to revamp the Volcker Rule last year, finalizing a rule in August that changed the “rebuttable presumption” and implemented a three-tiered approach meant to tailor compliance requirements.
The January proposal focused on the covered funds portion of the rule suggested that banks be allowed to invest in instruments such as credit funds, venture capital funds, customer facilitation funds and family wealth management vehicles — even if those funds contained multiple investments.
Regulators argued that allowing banks to invest in a fund structure rather than taking more direct stakes in companies would help them to diversify risk, which could in turn bolster safety and soundness.