Clifford Chance
The Volcker Rule: Key Considerations for Non-U.S. Banks and their Private Funds Teams
21 April 2014
In December 2013, U.S. financial regulators published joint final regulations to implement Section 13 of the Bank Holding Company Act, originally enacted as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and commonly referred to as the “Volcker Rule”.
There has since been significant commentary on the application of the Volcker Rule, much of which has understandably focused on the restrictions relating to banks’ proprietary trading operations. However, the Volcker Rule also impacts significantly on banks which hold interests in private equity funds (and similar funds such as infrastructure, real estate and debt funds). Its provisions relating to such interests are in some ways more complex than the proprietary trading restrictions.
Although primarily designed to limit the activities of U.S. banks, the Volcker Rule will also affect non-U.S. banks that have a connection to the United States and which hold or intend to acquire interests in private funds which have been or will be marketed in the United States. Many of these banks will be required to divest the private fund portfolios held on their balance sheets by July 2015 and will be restricted in their ability to make new private fund investments.
This paper has been prepared by Campbell Lutyens and Clifford Chance in order to address some of the key issues facing investment professionals within non-U.S. banks who are managing investments in private funds which are held on the bank’s balance sheet.
