Banking Group Wants Blanket Volcker Extension

Oct 10 2014 | 11:23am ET

Banks want more time to come into compliance with the Volcker rule’s new limits on their alternative investment activities—and they should get it, according to a major Wall Street lobbying group.

The Securities Industry and Financial Markets Association told the Federal Reserve that 14 of its members plan to seek extensions ahead of next year’s deadline for complying with the new regulation. The Volcker rule sets strict limits on how much of a bank’s Tier 1 capital can be invested in hedge and private-equity funds, as well as on how much of a fund’s assets can come from a bank.

The extension requests will cover nearly 3,000 illiquid funds, SIFMA said, creating the potential for chaos at the Fed. Instead of analyzing every request, the group suggests that the Fed simply issue blanket extensions for some types of funds, which would “enable banking entities to more effectively bring their activities into compliance in a safe and sound manner.”

Illiquid p.e. funds are the biggest problem facing banks ahead of the July 21 effective date for the Volcker provisions, SIFMA said. Foreign funds are also an issue.

Banks have had four years to prepare for the Volcker rule, which was part of the Dodd-Frank financial regulation reform in 2010.


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