FRB Grants Volcker Rule Conformance Extension to Three Banks
Commentary by Steven Lofchie
The Board of Governors of the Federal Reserve System ("FRB") approved an extension of the period during which Deutsche Bank AG, SVB Financial Group and UBS Group AG (collectively, the "Banks") must conform certain investments in illiquid funds to Volcker Rule requirements.
Section 13(h)(7) of the Bank Holding Company Act defines an "illiquid fund" as a covered fund that (i) "as of May 1, 2010, was principally invested in, or was invested and contractually committed to principally invest in, illiquid assets . . . [and] (ii) makes all investments pursuant to, and consistent with, an investment strategy to principally invest in illiquid assets." In December 2016, the FRB issued guidance on how to apply for extended illiquid fund transition periods, and included a specific set of requirements for entities seeking to apply for such an exemption.
Because of the extension, the Banks now will have until July 21, 2022 to conform all relevant investments to Volcker Act requirements.
Commentary
What material U.S. policy interest is served here that justifies the exercise of U.S. regulatory control over these foreign banks?