The Wall Street Journal: Big banks may get extra 5 years to comply with Volcker rule

WASHINGTON — Big banks can obtain more time to sell certain investment fund holdings banned by the so-called Volcker rule, the Federal Reserve said Monday.

The Fed issued new guidelines for banks to request an additional five years beyond a July 2017 deadline to sell the funds. The guidelines apply to funds known as “illiquid funds” because they can be hard to sell but are required to be divested under the Volcker rule’s ban on banks making hedge fund-like speculative bets.

The Fed said it “expects that the illiquid funds of banking entities will generally qualify for extensions, though extensions may not be granted in certain cases.” It said those cases include instances where a bank “has not demonstrated meaningful progress to conform or divest its illiquid funds, has a deficient compliance program under the Volcker rule,” or where the Fed has concerns about banks trying to evade the rule.

The Volcker rule, enacted in the wake of the financial crisis, has forced banks to exit most of their proprietary investing activities, which includes private-equity investments and stakes in hedge funds.

An expanded version of this report appears on WSJ.com.

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MarketWatch.com – Financial Services Industry News

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