General requirements of the Volcker Rule and its impact on non-US banking entities
General requirements of the Volcker Rule and its impact on non-US banking entities

The following Financial Services guidance note provides comprehensive and up to date legal information covering:

  • General requirements of the Volcker Rule and its impact on non-US banking entities
  • Background to the Volcker Rule and implementation
  • General requirements of the final rule
  • Proprietary trading
  • Covered funds
  • Compliance and reporting
  • Effect of the Economic Growth Act on the Volcker Rule
  • Restrictions on common names between banking entities and covered funds

Background to the Volcker Rule and implementation

The rules which came about from the so-called Volcker Rule provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act 2010 (Dodd-Frank) were approved by the US regulators on 10 December 2013, and came into force on 1 April 2014. The essential aim of the Volcker Rule is to remove the ability of US banks to engage as principal in certain trading or investment fund-related activities. The final rule allowed a conformance period until 21 July 2015, to enable banking entities to come into compliance with its prohibitions on proprietary trading and on covered fund ownership and sponsorship.

General requirements of the final rule

The Volcker Rule, section 619 of Dodd-Frank, added a new section 13 to the Bank Holding Company Act of 1956 (BHC Act) which generally prohibits any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain other relationships with a hedge fund or private equity fund (covered funds), subject to certain exceptions. New section 13 of the BHC Act also provides that a nonbank financial company designated by the Financial Stability Oversight Council (FSOC) for supervision by the Federal Reserve Board (while not a banking entity under section 13 of the BHC Act) would be subject