Banks Get Another Reprieve From Volcker Ban on Private Funds

  • Fed grants final one-year delay on selling stakes in funds
  • Agency had earlier said it would give the extension to 2017

Banks got their final 12-month reprieve from a Volcker Rule restriction on holding investments in private-equity firms and hedge funds.

The industry has until July 21 of next year to shed stakes in private funds, the Federal Reserve said in a statement Thursday. The extension had already been announced in 2014, but bankers had been waiting for the agency to confirm it before the previous extension was set to expire later this month.

The Volcker Rule, named for former Fed Chairman Paul Volcker, aimed to dial back banking-industry risks by banning firms from speculating on markets with their own money and from investing in hedge funds and private-equity funds. Under that second requirement, investment banks such as Goldman Sachs Group Inc. and Morgan Stanley have been selling off their stakes before the clock runs out.

The Fed said it’s giving the latest extension “to provide for orderly divestitures and to prevent market disruptions,” but the law doesn’t allow for any further broad one-year delays after 2017.

The Fed said it will also “provide more information in the near term” about whether it will take further action on banks’ most illiquid investments in private funds. Dodd-Frank provided banks a chance to seek five-year delays for individual funds that would be the most difficult to sell.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE