Banking Agencies Release Guidance Providing Temporary Relief for Foreign Excluded Funds

July 24, 2017

On Friday, the banking agencies responsible for implementing the Volcker Rule released guidance providing temporary relief with respect to foreign excluded funds that are controlled by a foreign bank and thus could be subjected to the Volcker Rule as a “banking entity.”

Prior to Friday’s release, the banking agencies had not provided any public guidance on whether the activities of a foreign excluded fund that is controlled by a foreign bank within the meaning of the Bank Holding Company Act (due, e.g., to the bank’s ownership of more than 25% of a class of the fund’s voting securities, serving as general partner or trustee of the fund or selecting a majority of the fund’s board) would be subject to the Volcker Rule’s proprietary trading and covered funds restrictions.

The guidance provides foreign banks with a positive, if temporary (one year), resolution of an issue that had been a source of concern and focus of their advocacy efforts over the past several years.