Federal banking regulators and others on Tuesday announced a final rule – unchanged from its proposed form – that excludes community banks from Volcker Rule prohibitions and restrictions on proprietary trading and certain relationships in hedge funds and private equity funds.
The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with hedge funds or private equity funds. Under the final rule, community banks with $10 billion or less in total consolidated assets and total trading assets and liabilities of 5% or less of total consolidated assets are excluded from the Volcker Rule.
The final rule also permits a hedge fund or private equity fund, under certain circumstances, to share the same name or a variation of the same name with an investment adviser as long as the adviser is not an insured depository institution, a company that controls an insured depository institution, or a bank holding company, the agencies said.
The rule, written to implement provisions of last year’s Economic Growth, Regulatory Relief, and Consumer Protection Act (EGRRCPA, S. 2155), was issued jointly by the Federal Reserve Board, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC).
The final rule is effective upon publication in the Federal Register.