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Agencies Release Another (More Limited) Set of Proposed Volcker Rule Changes

The five agencies responsible for implementing Section 13 of the Bank Holding Company Act, commonly known as the Volcker Rule, have issued a notice of proposed rulemaking requesting comment on proposed changes to the Volcker Rule. The proposed rule is intended to enact two specific amendments that were made earlier this year under the Economic Growth, Regulatory Relief, and Consumer Protection Act: the community bank exclusion and the removal of the name-sharing prohibition between banking entities and organized and offered funds. 

The proposed rule would (1) exclude from the Volcker Rule banking entities that have total consolidated assets equal to $10 billion or less and that have total consolidated trading assets and liabilities equal to 5 percent or less of total consolidated assets and (2) amend the restrictions on a banking entity or an affiliate of a banking entity, including an investment advisor, that organized and offered a hedge fund or private equity fund from sharing a name or variation of name with the fund. 

This most recent proposed rule should not be confused with the other proposed rule issued earlier this year – the Volcker 2.0 Proposal – that, if finalized, would enact broader changes to the Volcker Rule, including establishing varying levels of compliance requirements for banking entities based on trading asset size. The agencies issued separate proposed rules because  the Volcker 2.0 Proposal was being finalized at the time the EGRRCPA was passed. Rather than delay the release of the Volcker 2.0 Proposal in order to incorporate the requirements of the EGRRCPA, the agencies instead issued an interagency statement in July explaining that they would not enforce the Volcker Rule in a manner inconsistent with the changes in the EGRRCPA, pending separate rule-making enacting those changes.

The timeline for finalizing the proposed rule and the Volcker 2.0 Proposal is uncertain, as is whether the agencies will continue a bifurcated regulatory process. Given that the proposed rule is statutorily mandated and is narrower in scope, it would not be surprising if the proposed rule were to be finalized before the Volcker 2.0 Proposal.