Does the Volcker Rule apply to non US banks?
The Volcker Rule does apply to every foreign entity that directly or indirectly maintains a bank branch or agency in the United States, or controls a commercial lending company.
A bank may be excluded from the Volcker Rule if it does not have more than $10 billion in total consolidated assets and does not have total trading assets and liabilities of 5% or more of total consolidated assets.
The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with a hedge fund or private equity fund.
Section 13(d)(1)(I) of the Bank Holding Company Act ("BHC Act") and section 248.13(b) of the final rule provide an exemption for certain covered fund activities conducted by foreign banking entities (the "SOTUS covered fund exemption") provided that, among other conditions, "no ownership interest in such hedge fund or ...
Named after former Federal Reserve Chairman Paul Volcker, the Volcker Rule disallows short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for banks' own accounts under the premise that these activities do not benefit banks' customers.
In addition to the proprietary trading ban, subject to enumerated exceptions, the Volcker Rule prohibits a banking entity from, as principal, directly or indirectly, acquiring or retaining any ownership interest in or sponsoring a “covered fund” Sponsorship of a “covered fund” includes (i) serving as a general partner, ...
Loosely put, the Rule defines a covered fund as anything considered an investment company in the Investment Company Act, including private equity and hedge funds, as well as commodity pools with certain exclusions, and funds sponsored by a US banking entity where the affiliate holds ownership interests.
The Rule not only impacts U.S. bank holding companies (“BHCs”) (including their broker-dealer and unregistered subsidiaries) and banks, but also foreign holding companies with either U.S. branches or U.S. bank subsidiaries, as well as nonbank bank or thrift holding companies (e.g., GE Capital) – and all of their ...
The Volcker rule generally prohibits banking entities from engaging in proprietary trading or investing in or sponsoring hedge funds or private equity funds.
Super 23A: Permissible Low-risk Transactions with Related Funds. The Volcker Rule generally prohibits all covered transactions between a banking entity and a covered fund that it advises or sponsors (a “related fund”).
Which covered fund exemption is available only to foreign banking entities that do not participate in marketing the covered fund in the US?
Section 13(d)(1)(I) of the Bank Holding Company Act (“BHC Act”) and section 351.13(b) of the final rule provide an exemption for certain covered fund activities conducted by foreign banking entities (the “SOTUS covered fund exemption”) provided that, among other conditions, “no ownership interest in such hedge fund or ...
Section 203 creates an exemption to Section 619 of Dodd-Frank, commonly referred to as the Volcker Rule, from prohibitions on proprietary trading – owning and trading securities for the bank's portfolio for direct market gain – and from having certain relationships with a hedge fund or private equity fund.
A Shell Bank is a bank that has no physical presence in the country in which it is incorporated or licensed, and is not affiliated with a regulated financial Group that is subject to effective consolidated supervision.
The Volcker Rule refers to Sec 619 of the Dodd-Frank Act, which prohibits banks from engaging in proprietary trading, or from using their depositors' funds to invest in risky investment instruments. The rule also prohibits banks from owning or investing in hedge funds or private equity funds.
Relaxation, 2020-present
On June 25, 2020, the Volcker Regulators relaxed part of the rules involving banks investing in venture capital and for derivative trading.
The Volcker Rule does apply to every foreign entity that directly or indirectly maintains a bank branch or agency in the United States, or controls a commercial lending company.
§ 255.3 Prohibition on proprietary trading. (a) Prohibition. Except as otherwise provided in this subpart, a banking entity may not engage in proprietary trading. Proprietary trading means engaging as principal for the trading account of the banking entity in any purchase or sale of one or more financial instruments.
A foreign fund is a type of fund that invests in companies that are based internationally, or outside the investor's country of residence. Foreign funds are also known as international funds. Foreign funds can be mutual funds, closed-end funds, or exchange-traded funds. 1
Banks that have total consolidated assets equal to $10 billion or less and total trading assets and liabilities equal to 5 percent or less of total consolidated assets are generally exempt from the Volcker rule.
The Final Rule modifies the “covered fund” exclusion for loan securitization vehicles that (a) issue asset-backed securities and (b) hold only: (i) loans; (ii) certain rights and assets that arise from the structure of the loan securitization or from the loans supporting a loan securitization, including cash ...
What is the impact of the Volcker Rule on targeted banks systemic risk liquidity and financial reporting quality?
We conclude that the Volcker Rule has a positive effect on smaller banks in that it levels the playing field between large and small banks. Further analyses indicate that banks with higher systemic risk, less liquidity, and worse financial reporting quality are more likely to be negatively impacted by the Volcker Rule.
Because foreign jurisdictions are unable to regulate investment funds that are not registered in their jurisdiction, most prohibit the sale of foreign [including US] mutual funds to residents living in their countries. This includes overseas US citizens trying to buy investment funds back in the United States.
CFPB is authorized to write rules to ensure that non-banks are legitimate entities and able to perform their obligations to consumers. Such rules may include background checks for principals, officers, directors, or key personnel and bonding or other appropriate financial requirements.
Examples of nonbank financial institutions include insurance firms, venture capitalists, currency exchanges, some microloan organizations, and pawn shops.
Nonbank financial companies (NBFCs), also known as nonbank financial institutions (NBFIs), are entities that provide similar services to a bank but do not hold a banking license. As a result, they are subject to different regulations than banks, and in many regards are less regulated than banks. There are many NBFCs.
