Foreign banks to benefit from US bid to simplify ‘Volcker Rule’
WASHINGTON: Foreign banks and funds are set to benefit from a move by US regulators on Wednesday to simplify a trading rule that foreign banks and regulators say has inadvertently ensnared firms operating as far afield as Europe and Asia.
The Federal Reserve, alongside other US regulators, on Wednesday proposed rewriting the “Volcker Rule” introduced following the 2007-2009 financial crisis in a bid to simplify the regulation and make it easier for banks to comply.
Created by the 2010 Dodd-Frank financial reform law, the rule bans lenders that accept US taxpayerinsured deposits from engaging in proprietary trading or investing in investment vehicles such as hedge funds or private equity funds.
Foreign banks have often complained that the Volcker Rule improperly affects their non-US operations because it broadly applies to any foreign bank that has a relationships with a US entity or affiliate.
Many overseas funds that are organised and offered exclusively outside the United States are also caught by the rule because they are often part of a broader foreign banking group.
Charles Horn, a partner at law firm Morgan Lewis in Washington, said the proposal released on Wednesday contains several elements that should benefit global banks, as well as US institutions.
He pointed to a move by the regulators to make it easier for foreign banks to qualify for an exemption from the rule, including scrapping the requirement that to qualify they must not trade through any US entity. — Reuters