Fund managers can have their say on Volcker rule

The 25-question consultation “paves the way” for a rewrite of the rule that restricts banks’ investment into private equity funds.

Private fund managers are being asked to assess the breadth, efficacy and compliance burden of the Volcker Rule in a consultation launched by a banking regulator, according sister publication Private Funds Management.

The Office of the Comptroller of the Currency, one of the five regulators which originally drafted the legislation, has issued a 25-question consultation on the rule which restricts the amount of Tier 1 capital a bank can invest in private equity.

The OCC has asked whether there are issues related to the scope of the rule’s application that could be addressed by regulation, what evidence there is that the final rule has been effective or ineffective at limiting bank exposure to private equity, and whether there are any categories of entities for which the final rule could be revised to reduce the burden associated with compliance.

The regulator is not proposing any specific changes to the rule, but it is “paving the way” for a rewrite or a clarification of some sections of the regulation, according to law firm White & Case.

“The OCC indicates its intention to use any information obtained as a result of the consultation to inform the drafting of a proposed rule, which suggests that comments from all banking entities, whether or not supervised by the OCC, are solicited,” the firm said in a client note.

Any revisions to the rule proposed as a result of the consultation would need to be approved by the other four regulators responsible for its oversight.

Consensus that the Volcker Rule needs simplification has emerged from various sources within the Trump administration. The Treasury Department said in June that the current definition of covered funds – in which bank investments are restricted – was too broad. Ex-Federal Reserve governor Daniel Tarullo said in his exit interview there was scope to reform the rule because it is “damaging market-making activities”.

The consultation is open until September 21.