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.