PNC Says It Expects to Unwind $1.3 Billion Because of Volcker

PNC Financial Services Group Inc. (PNC), the sixth-largest U.S. bank by deposits, may need to eliminate as much as $1.32 billion in invested capital under the Volcker rule.

PNC held $880 million in private equity and hedge funds and sponsored three such funds with total invested capital of $441 million as of Dec. 31, the Pittsburgh-based bank said today in its annual filing with regulators. PNC said it’s likely some of the amounts will fall over time “in the ordinary course of business before compliance is required.”

“A forced sale of some of these investments due to the Volcker rule could result in PNC receiving less value than it would otherwise have received,” the bank said in the filing.

PNC and other U.S. regional lenders are grappling with how the Volcker rule, a proposal made under the 2010 Dodd-Frank Act that seeks to limit risky trading, will affect their companies. Executives at lenders such as Buffalo-based M&T Bank Corp. (MTB) have said the rule would place a burden on smaller banks just to prove they’re not in the business of proprietary trading.

“Any meaningful limitation on PNC’s ability to hedge its risks in the ordinary course or to trade on behalf of customers would likely be adverse to PNC’s business,” the company wrote in the filing. “The proposed rules contain extensive compliance and recordkeeping requirements related to permissible trading activities. Such requirements, if included in a final rule, could increase the costs of hedging or other types of permissible transactions.”

To contact the reporter on this story: Laura Marcinek in New York at lmarcinek3@bloomberg.net.

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net.

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