PRESS RELEASE
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
October 11, 2011
Media Contact:
Andrew Gray
(202) 898-7192
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html ) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). 160-2011
FDIC Board Passes Notice of Proposed Rulemaking on Prohibitions and
Restrictions on Proprietary Trading and Certain Interests In, and
Relationships With, Hedge Funds and Private Equity Funds
The Federal Deposit Insurance Corporation requested public comment on a proposed
regulation implementing the so-called "Volcker Rule" requirements of section 619 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act. That section of the Act
generally prohibits two activities of banking entities. First, it prohibits insured depository
institutions, bank holding companies, and their subsidiaries or affiliates (banking
entities) from engaging in short-term proprietary trading of any security, derivative, and
certain other financial instruments for a banking entity's own account, subject to certain
exemptions. Second, it prohibits owning, sponsoring, or having certain relationships
with, a hedge fund or private equity fund, subject to certain exemptions.
The Act also prohibits banking entities from entering into any transaction or engaging in
any activity that would (i) involve or result in a material conflict of interest, (ii) result in a
material exposure to high-risk assets or high-risk trading strategies, (iii) pose a threat to
the safety and soundness of the banking entity, or (iv) pose a threat to the financial
stability of the United States.
The proposal, which will be issued jointly with the Federal Reserve Board, the Office of
the Comptroller of the Currency, and the Securities and Exchange Commission, clarifies
the scope of the Act's prohibitions and, consistent with statutory authority, provides
certain exemptions to these prohibitions. It is anticipated that the Commodity Futures
Trading Commission will issue a comparable proposal in the near future.
The proposed rule would require banking entities to establish an internal compliance
program that is designed to ensure and monitor compliance with the statute's
prohibitions and restrictions, and implementing regulations. The internal compliance
Federal Deposit Insurance Corporation Each Depositor insured to at least $250,000
FOR IMMEDIATE RELEASE
October 11, 2011
Media Contact:
Andrew Gray
(202) 898-7192
Congress created the Federal Deposit Insurance Corporation in 1933 to restore public confidence in the nation's
banking system. It promotes the safety and soundness of these institutions by identifying, monitoring and addressing
risks to which they are exposed. The FDIC receives no federal tax dollars — insured financial institutions fund its
operations.
FDIC press releases and other information are available on the Internet at www.fdic.gov, by subscription electronically
(go to www.fdic.gov/about/subscriptions/index.html ) and may also be obtained through the FDIC's Public Information
Center (877-275-3342 or 703-562-2200). 160-2011
FDIC Board Passes Notice of Proposed Rulemaking on Prohibitions and
Restrictions on Proprietary Trading and Certain Interests In, and
Relationships With, Hedge Funds and Private Equity Funds
The Federal Deposit Insurance Corporation requested public comment on a proposed
regulation implementing the so-called "Volcker Rule" requirements of section 619 of the
Dodd-Frank Wall Street Reform and Consumer Protection Act. That section of the Act
generally prohibits two activities of banking entities. First, it prohibits insured depository
institutions, bank holding companies, and their subsidiaries or affiliates (banking
entities) from engaging in short-term proprietary trading of any security, derivative, and
certain other financial instruments for a banking entity's own account, subject to certain
exemptions. Second, it prohibits owning, sponsoring, or having certain relationships
with, a hedge fund or private equity fund, subject to certain exemptions.
The Act also prohibits banking entities from entering into any transaction or engaging in
any activity that would (i) involve or result in a material conflict of interest, (ii) result in a
material exposure to high-risk assets or high-risk trading strategies, (iii) pose a threat to
the safety and soundness of the banking entity, or (iv) pose a threat to the financial
stability of the United States.
The proposal, which will be issued jointly with the Federal Reserve Board, the Office of
the Comptroller of the Currency, and the Securities and Exchange Commission, clarifies
the scope of the Act's prohibitions and, consistent with statutory authority, provides
certain exemptions to these prohibitions. It is anticipated that the Commodity Futures
Trading Commission will issue a comparable proposal in the near future.
The proposed rule would require banking entities to establish an internal compliance
program that is designed to ensure and monitor compliance with the statute's
prohibitions and restrictions, and implementing regulations. The internal compliance
program would be subject to oversight by the banking entity's board of directors and
appropriate federal supervisory agency. The proposal also requires banking entities with
significant trading operations to report to the appropriate federal supervisory agency
certain quantitative measurements designed to assist the federal supervisory agencies
and banking entities in identifying prohibited proprietary trading in the context of exempt
activities.
Transactions in certain instruments, including obligations of the U.S. government or a
U.S. government agency, the government-sponsored enterprises, and state and local
governments, are exempt from the statute's prohibitions. Activities exempted include
market making, underwriting, and risk-mitigating hedging. The statute also permits
banking entities to organize and offer a hedge fund or private equity fund subject to a
number of conditions, including permitted de minimis investments in such funds subject
to limitations.
The proposed rule includes regulatory commentary intended to assist banking entities in
distinguishing permitted market making-related activities from prohibited proprietary
trading activities. It also includes a number of elements intended to reduce the burden
of the proposal on smaller, less-complex banking entities. For example, the proposal
limits the extent to which smaller banking entities are required to report quantitative
measurements.
Comments on the proposal will be received through January 13, 2012.
Attachment: www.fdic.gov/news/board/2011Octno6.pdf - PDF (PDF Help)
appropriate federal supervisory agency. The proposal also requires banking entities with
significant trading operations to report to the appropriate federal supervisory agency
certain quantitative measurements designed to assist the federal supervisory agencies
and banking entities in identifying prohibited proprietary trading in the context of exempt
activities.
Transactions in certain instruments, including obligations of the U.S. government or a
U.S. government agency, the government-sponsored enterprises, and state and local
governments, are exempt from the statute's prohibitions. Activities exempted include
market making, underwriting, and risk-mitigating hedging. The statute also permits
banking entities to organize and offer a hedge fund or private equity fund subject to a
number of conditions, including permitted de minimis investments in such funds subject
to limitations.
The proposed rule includes regulatory commentary intended to assist banking entities in
distinguishing permitted market making-related activities from prohibited proprietary
trading activities. It also includes a number of elements intended to reduce the burden
of the proposal on smaller, less-complex banking entities. For example, the proposal
limits the extent to which smaller banking entities are required to report quantitative
measurements.
Comments on the proposal will be received through January 13, 2012.
Attachment: www.fdic.gov/news/board/2011Octno6.pdf - PDF (PDF Help)