Volcker Rule Delay For Bank P.E. Investments Probable

Dec 9 2014 | 9:33am ET

The Federal Reserve is likely to give Wall Street banks more time—much more—to unload their private-equity investments.

Banks face a July deadline to comply with the 2010 Volcker rule, which strictly limits their alternative investments activities, including how much of their own capital they can invest in p.e. funds. But the Dodd-Frank Act gives the Fed the power to grant extensions.

Banks have pushed to have the p.e. portion of the law delayed until 2022, allowing them to hold their investments for the remainder of the funds’ lifespan. And the Fed, which is set to announce a decision on the extensions soon, appears likely to acquiesce, Bloomberg News reports.

“There’s considerable pressure the Fed is feeling in that they don’t want institutions to have a bloodbath trying to divest funds,” Paul Hastings’ Kevin Petrasic said. “The Fed has been indicating flexibility.”

Despite reducing their hedge fund and p.e. holdings over the past several years, Goldman Sachs still has $7 billion tied up in private-equity investments. Morgan Stanley has $2.5 billion.

The Volcker rule allows banks to make requests for individual funds. To avoid a morass of such applications, the Fed is seen as likely to simply grant a blanket extension.


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