35008 Federal Register / Vol. 84, No. 140 / Monday, July 22, 2019 / Rules and Regulations
1 12 U.S.C. 1851.
2 See id.
3 See 12 U.S.C. 1851(b)(2). Under section
13(b)(2)(B) of the BHC Act, rules implementing
section 13’s prohibitions and restrictions must be
issued by: (i) The appropriate Federal banking
agencies (i.e., the Board, the OCC, and the FDIC),
jointly, with respect to insured depository
institutions; (ii) the Board, with respect to any
company that controls an insured depository
institution, or that is treated as a bank holding
company for purposes of section 8 of the
International Banking Act, any nonbank financial
company supervised by the Board, and any
subsidiary of any of the foregoing (other than a
subsidiary for which an appropriate Federal
banking agency, the SEC, or the CFTC is the
primary financial regulatory agency); (iii) the CFTC
with respect to any entity for which it is the
primary financial regulatory agency, as defined in
section 2 of the Dodd-Frank Act; and (iv) the SEC
with respect to any entity for which it is the
primary financial regulatory agency, as defined in
section 2 of the Dodd-Frank Act. See id.
4 See ‘‘Prohibitions and Restrictions on
Proprietary Trading and Certain Interests in, and
Relationships With, Hedge Funds and Private
Equity Funds; Final Rule,’’ 79 FR 5535 (Jan. 31,
2014).
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 44
[Docket ID OCC–2018–0029]
RIN 1557–AE47
FEDERAL RESERVE SYSTEM
12 CFR Part 248
[Docket No. R–1643]
RIN 7100–AF33
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 351
RIN 3064–AE88
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 75
RIN 3038–AE72
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 255
[Release no. BHCA–6; File no. S7–30–18]
RIN 3235–AM43
Revisions to Prohibitions and
Restrictions on Proprietary Trading
and Certain Interests In, and
Relationships With, Hedge Funds and
Private Equity Funds
AGENCY: Office of the Comptroller of the
Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); Federal Deposit
Insurance Corporation (FDIC); Securities
and Exchange Commission (SEC); and
Commodity Futures Trading
Commission (CFTC).
ACTION: Final rules.
SUMMARY: The OCC, Board, FDIC, SEC,
and CFTC are adopting final rules to
amend the regulations implementing the
Bank Holding Company Act’s
prohibitions and restrictions on
proprietary trading and certain interests
in, and relationships with, hedge funds
and private equity funds (commonly
known as the Volcker Rule) in a manner
consistent with the statutory
amendments made pursuant to certain
sections of the Economic Growth,
Regulatory Relief, and Consumer
Protection Act (EGRRCPA). The
EGRRCPA amendments and the final
rules exclude from these prohibitions
and restrictions certain firms that have
total consolidated assets equal to $10
billion or less and total trading assets
and liabilities equal to five percent or
less of total consolidated assets. The
EGRRCPA amendments and the final
rules also revise the restrictions
applicable to the naming of a hedge
fund or private equity fund to permit an
investment adviser that is a banking
entity to share a name with the fund
under certain circumstances.
DATES: These final rules are effective on
July 22, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Roman Goldstein, Risk
Specialist, Treasury and Market Risk
Policy, 202–649–6360; Tabitha Edgens,
Senior Attorney; Mark O’Horo, Senior
Attorney, Chief Counsel’s Office, (202)
649–5510; for persons who are deaf or
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Flora Ahn, Special Counsel,
(202) 452–2317, Gregory Frischmann,
Senior Counsel, (202) 452–2803, Kirin
Walsh, Attorney, (202) 452–3058, or
Sarah Podrygula, Attorney, (202) 912–
4658, Legal Division, Constance
Horsley, Deputy Associate Director,
(202) 452–5239, Cecily Boggs, Senior
Financial Institution Policy Analyst,
(202) 530–6209, David Lynch, Deputy
Associate Director, (202) 452–2081,
Division of Supervision and Regulation;
Board of Governors of the Federal
Reserve System, 20th and C Streets NW,
Washington, DC 20551.
FDIC: Bobby R. Bean, Associate
Director, bbean@fdic.gov, Michael E.
Spencer, Chief, Capital Markets
Strategies, michspencer@fdic.gov,
Andrew D. Carayiannis, Senior Policy
Analyst, acarayiannis@fdic.gov, or Brian
Cox, Capital Markets Policy Analyst,
brcox@fdic.gov, Capital Markets Branch,
(202) 898–6888; Michael B. Phillips,
Counsel, mphillips@fdic.gov, Benjamin
J. Klein, Counsel, bklein@fdic.gov, or
Annmarie H. Boyd, Counsel, aboyd@
fdic.gov, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW, Washington, DC 20429.
SEC: Andrew R. Bernstein, Senior
Special Counsel, Sam Litz, Attorney-
Adviser, Aaron Washington, Special
Counsel, or Carol McGee, Assistant
Director, at (202) 551–5870, Office of
Derivatives Policy and Trading
Practices, Division of Trading and
Markets, and Matthew Cook, Senior
Counsel, Benjamin Tecmire, Senior
Counsel, and Jennifer Songer, Branch
Chief, at (202) 551–6787 or IArules@
sec.gov, Division of Investment
Management, U.S. Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549.
CFTC: Cantrell Dumas, Special
Counsel, (202) 418–5043, cdumas@
cftc.gov; Jeffrey Hasterok, Data and Risk
Analyst, (646) 746–9736, jhasterok@
cftc.gov, Division of Swap Dealer and
Intermediary Oversight; Mark Fajfar,
Assistant General Counsel, (202) 418–
6636, mfajfar@cftc.gov, Office of the
General Counsel; Stephen Kane,
Research Economist, (202) 418–5911,
skane@cftc.gov, Office of the Chief
Economist; Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street NW, Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
I. Background
Section 13 of the Bank Holding
Company Act of 1956 (BHC Act),1 also
known as the Volcker Rule, generally
prohibits any banking entity from
engaging in proprietary trading or from
acquiring or retaining an ownership
interest in, sponsoring, or having certain
relationships with a hedge fund or
private equity fund, subject to certain
exemptions.2
Under the statute, authority for
developing and adopting regulations to
implement the prohibitions and
restrictions of section 13 of the BHC Act
is shared among the OCC, Board, FDIC,
SEC, and CFTC (the agencies).3 The
agencies adopted final rules
implementing section 13 of the BHC Act
in December 2013 (the 2013 final rule).4
The agencies recently proposed
amendments to these rules to provide
clarity about what activities are
prohibited, and to improve supervision
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jbell on DSK3GLQ082PROD with RULES
1 12 U.S.C. 1851.
2 See id.
3 See 12 U.S.C. 1851(b)(2). Under section
13(b)(2)(B) of the BHC Act, rules implementing
section 13’s prohibitions and restrictions must be
issued by: (i) The appropriate Federal banking
agencies (i.e., the Board, the OCC, and the FDIC),
jointly, with respect to insured depository
institutions; (ii) the Board, with respect to any
company that controls an insured depository
institution, or that is treated as a bank holding
company for purposes of section 8 of the
International Banking Act, any nonbank financial
company supervised by the Board, and any
subsidiary of any of the foregoing (other than a
subsidiary for which an appropriate Federal
banking agency, the SEC, or the CFTC is the
primary financial regulatory agency); (iii) the CFTC
with respect to any entity for which it is the
primary financial regulatory agency, as defined in
section 2 of the Dodd-Frank Act; and (iv) the SEC
with respect to any entity for which it is the
primary financial regulatory agency, as defined in
section 2 of the Dodd-Frank Act. See id.
4 See ‘‘Prohibitions and Restrictions on
Proprietary Trading and Certain Interests in, and
Relationships With, Hedge Funds and Private
Equity Funds; Final Rule,’’ 79 FR 5535 (Jan. 31,
2014).
DEPARTMENT OF THE TREASURY
Office of the Comptroller of the
Currency
12 CFR Part 44
[Docket ID OCC–2018–0029]
RIN 1557–AE47
FEDERAL RESERVE SYSTEM
12 CFR Part 248
[Docket No. R–1643]
RIN 7100–AF33
FEDERAL DEPOSIT INSURANCE
CORPORATION
12 CFR Part 351
RIN 3064–AE88
COMMODITY FUTURES TRADING
COMMISSION
17 CFR Part 75
RIN 3038–AE72
SECURITIES AND EXCHANGE
COMMISSION
17 CFR Part 255
[Release no. BHCA–6; File no. S7–30–18]
RIN 3235–AM43
Revisions to Prohibitions and
Restrictions on Proprietary Trading
and Certain Interests In, and
Relationships With, Hedge Funds and
Private Equity Funds
AGENCY: Office of the Comptroller of the
Currency (OCC), Treasury; Board of
Governors of the Federal Reserve
System (Board); Federal Deposit
Insurance Corporation (FDIC); Securities
and Exchange Commission (SEC); and
Commodity Futures Trading
Commission (CFTC).
ACTION: Final rules.
SUMMARY: The OCC, Board, FDIC, SEC,
and CFTC are adopting final rules to
amend the regulations implementing the
Bank Holding Company Act’s
prohibitions and restrictions on
proprietary trading and certain interests
in, and relationships with, hedge funds
and private equity funds (commonly
known as the Volcker Rule) in a manner
consistent with the statutory
amendments made pursuant to certain
sections of the Economic Growth,
Regulatory Relief, and Consumer
Protection Act (EGRRCPA). The
EGRRCPA amendments and the final
rules exclude from these prohibitions
and restrictions certain firms that have
total consolidated assets equal to $10
billion or less and total trading assets
and liabilities equal to five percent or
less of total consolidated assets. The
EGRRCPA amendments and the final
rules also revise the restrictions
applicable to the naming of a hedge
fund or private equity fund to permit an
investment adviser that is a banking
entity to share a name with the fund
under certain circumstances.
DATES: These final rules are effective on
July 22, 2019.
FOR FURTHER INFORMATION CONTACT:
OCC: Roman Goldstein, Risk
Specialist, Treasury and Market Risk
Policy, 202–649–6360; Tabitha Edgens,
Senior Attorney; Mark O’Horo, Senior
Attorney, Chief Counsel’s Office, (202)
649–5510; for persons who are deaf or
hearing impaired, TTY, (202) 649–5597,
Office of the Comptroller of the
Currency, 400 7th Street SW,
Washington, DC 20219.
Board: Flora Ahn, Special Counsel,
(202) 452–2317, Gregory Frischmann,
Senior Counsel, (202) 452–2803, Kirin
Walsh, Attorney, (202) 452–3058, or
Sarah Podrygula, Attorney, (202) 912–
4658, Legal Division, Constance
Horsley, Deputy Associate Director,
(202) 452–5239, Cecily Boggs, Senior
Financial Institution Policy Analyst,
(202) 530–6209, David Lynch, Deputy
Associate Director, (202) 452–2081,
Division of Supervision and Regulation;
Board of Governors of the Federal
Reserve System, 20th and C Streets NW,
Washington, DC 20551.
FDIC: Bobby R. Bean, Associate
Director, bbean@fdic.gov, Michael E.
Spencer, Chief, Capital Markets
Strategies, michspencer@fdic.gov,
Andrew D. Carayiannis, Senior Policy
Analyst, acarayiannis@fdic.gov, or Brian
Cox, Capital Markets Policy Analyst,
brcox@fdic.gov, Capital Markets Branch,
(202) 898–6888; Michael B. Phillips,
Counsel, mphillips@fdic.gov, Benjamin
J. Klein, Counsel, bklein@fdic.gov, or
Annmarie H. Boyd, Counsel, aboyd@
fdic.gov, Legal Division, Federal Deposit
Insurance Corporation, 550 17th Street
NW, Washington, DC 20429.
SEC: Andrew R. Bernstein, Senior
Special Counsel, Sam Litz, Attorney-
Adviser, Aaron Washington, Special
Counsel, or Carol McGee, Assistant
Director, at (202) 551–5870, Office of
Derivatives Policy and Trading
Practices, Division of Trading and
Markets, and Matthew Cook, Senior
Counsel, Benjamin Tecmire, Senior
Counsel, and Jennifer Songer, Branch
Chief, at (202) 551–6787 or IArules@
sec.gov, Division of Investment
Management, U.S. Securities and
Exchange Commission, 100 F Street NE,
Washington, DC 20549.
CFTC: Cantrell Dumas, Special
Counsel, (202) 418–5043, cdumas@
cftc.gov; Jeffrey Hasterok, Data and Risk
Analyst, (646) 746–9736, jhasterok@
cftc.gov, Division of Swap Dealer and
Intermediary Oversight; Mark Fajfar,
Assistant General Counsel, (202) 418–
6636, mfajfar@cftc.gov, Office of the
General Counsel; Stephen Kane,
Research Economist, (202) 418–5911,
skane@cftc.gov, Office of the Chief
Economist; Commodity Futures Trading
Commission, Three Lafayette Centre,
1155 21st Street NW, Washington, DC
20581.
SUPPLEMENTARY INFORMATION:
I. Background
Section 13 of the Bank Holding
Company Act of 1956 (BHC Act),1 also
known as the Volcker Rule, generally
prohibits any banking entity from
engaging in proprietary trading or from
acquiring or retaining an ownership
interest in, sponsoring, or having certain
relationships with a hedge fund or
private equity fund, subject to certain
exemptions.2
Under the statute, authority for
developing and adopting regulations to
implement the prohibitions and
restrictions of section 13 of the BHC Act
is shared among the OCC, Board, FDIC,
SEC, and CFTC (the agencies).3 The
agencies adopted final rules
implementing section 13 of the BHC Act
in December 2013 (the 2013 final rule).4
The agencies recently proposed
amendments to these rules to provide
clarity about what activities are
prohibited, and to improve supervision
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jbell on DSK3GLQ082PROD with RULES
35009Federal Register / Vol. 84, No. 140 / Monday, July 22, 2019 / Rules and Regulations
5 See ‘‘Proposed Revisions to Prohibitions and
Restrictions on Proprietary Trading and Certain
Interests in, and Relationships With, Hedge Funds
and Private Equity Funds,’’ 83 FR 33432 (July 17,
2018).
6 See Economic Growth, Regulatory Relief, and
Consumer Protection Act, Public Law 115–174,
sections 203, 204 (May 24, 2018). These provisions
were effective upon EGRRCPA’s enactment.
7 Section 3(c)(2) of the FDI Act defines an insured
depository institution to include any bank or
savings association the deposits of which are
insured by the FDIC under the FDI Act. 12 U.S.C.
1813(c)(2).
8 12 U.S.C. 1813(c)(2), 1851(h)(1).
9 Section 203 amended section 13(h)(1)(B) of the
BHC Act by excluding certain institutions from the
term ‘‘insured depository institution’’ exclusively
for the purposes of section 13. Insured banks and
savings associations that qualify for this exclusion
for the purposes of section 13 of the BHC Act
remain insured depository institutions under
section 3(c)(2) of the FDI Act. Additionally, an
institution that meets the criteria to be excluded
from the definition of insured depository institution
under EGRRCPA may still be a banking entity by
virtue of its affiliation with another insured
depository institution or a company that is treated
as a bank holding company under section 8 of the
IBA.
10 The terms ‘‘hedge fund’’ and ‘‘private equity
fund’’ are defined at 12 U.S.C. 1851(h)(2). See also
12 CFR 44.10(b); 12 CFR 248.10(b); 12 CFR
351.10(b); 17 CFR 255.10(b); 17 CFR 75.10(b)
(defining ‘‘covered fund’’ for purposes of the 2013
final rule).
11 12 U.S.C. 1851(d)(1)(G)(vi) (2017).
12 12 U.S.C. 3106.
13 ‘‘Proposed Revisions to Prohibitions and
Restrictions on Proprietary Trading and Certain
Interests in, and Relationships With, Hedge Funds
and Private Equity Funds,’’ 84 FR 2778 (Feb. 8,
2019).
14 See American Bankers Association;
Independent Community Bankers of America;
National Association of Federally-Insured Credit
Unions; California Bankers Association.
15 Los Huertos and Mount; National Association
of Federally-Insured Credit Unions.
16 See Competitive Enterprise Institute;
Competitive Enterprise Institute et al.;
Luetkemeyer; Matthew Thomas.
and implementation of section 13 of the
BHC Act.5
The Economic Growth, Regulatory
Relief, and Consumer Protection Act
(EGRRCPA) amended section 13 of the
BHC Act by modifying the definition of
‘‘banking entity’’ to exclude certain
community banks and their affiliates
from section 13’s restrictions and by
permitting an investment adviser that is
a banking entity to share a name with
a hedge fund or private equity fund that
the banking entity organizes and offers
under certain circumstances.6
Prior to the enactment of EGRRCPA,
the definition of ‘‘banking entity,’’ for
purposes of section 13 of the BHC Act,
included any insured depository
institution, as defined in the Federal
Deposit Insurance Act (FDI Act),7 any
company that controls an insured
depository institution, or that is treated
as a bank holding company for purposes
of section 8 of the International Banking
Act of 1978 (IBA), and any affiliate or
subsidiary of such entity (excluding
from the term insured depository
institution certain insured depository
institutions that function solely in a
trust or fiduciary capacity, subject to a
variety of conditions).8
Section 203 of EGRRCPA, entitled
‘‘Community bank relief,’’ modified the
scope of the term ‘‘banking entity’’ to
exclude certain community banks and
their affiliates. Specifically, under
section 203, the term ‘‘insured
depository institution’’ no longer
includes any institution that does not
have, and is not controlled by a
company that has: (i) More than $10
billion in total consolidated assets; and
(ii) total trading assets and trading
liabilities, as reported on the most
recent applicable regulatory filing filed
by the institution, that are more than 5
percent of total consolidated assets.
Therefore, an insured depository
institution and its affiliates generally are
not ‘‘banking entities’’ if the insured
depository institution and each
affiliated insured depository institution
meets the statutory exclusion.9
However, EGRRCPA did not amend the
definition of ‘‘banking entity’’ as it
relates to a company that is treated as
a bank holding company for purposes of
section 8 of the IBA. Accordingly, the
statutory exclusion does not apply to a
foreign banking organization with a U.S.
branch or agency, which continues to be
subject to the prohibitions in section 13
of the BHC Act.
Section 204 of EGRRCPA revised the
restrictions applicable to the naming of
a hedge fund or private equity fund 10 to
permit an investment adviser that is a
banking entity to share a name with the
fund under certain circumstances. Prior
to enactment of EGRRCPA, section 13
provided that a banking entity (or an
affiliate of the banking entity), including
an investment adviser, that organized
and offered a hedge fund or private
equity fund could not share the same
name or a variation of the same name
with the fund (the name-sharing
restriction).11 Section 204 of EGRRCPA
amended the name-sharing restriction to
permit a hedge fund or private equity
fund organized and offered by a banking
entity to share the same name or a
variation of the same name as a banking
entity that is an investment adviser to
the hedge fund or private equity fund,
if: (1) The investment adviser is not an
insured depository institution, a
company that controls an insured
depository institution, or a company
that is treated as a bank holding
company for purposes of section 8 of the
IBA; 12 (2) the investment adviser does
not share the same name or a variation
of the same name with any such
entities; and (3) the name does not
contain the word ‘‘bank.’’
On February 8, 2019, the agencies
published a notice of proposed
rulemaking (the proposal) to revise the
2013 final rule consistent with the
EGRRCPA statutory amendments.13 For
the reasons discussed below, the
agencies are now adopting the proposal
as final without change.
II. Description of the Final Rules
A. Definition of Banking Entity
Consistent with the proposal, the
agencies are modifying the definition of
‘‘insured depository institution’’ in
§ __.2(r) of the 2013 final rule to
conform that definition with section 203
of EGRRCPA. Under this revised
definition, an insured depository
institution must satisfy two conditions
for it and its affiliates to qualify for the
exclusion. First, the insured depository
institution, and every entity that
controls it, must have total consolidated
assets equal to or less than $10 billion.
Second, total consolidated trading assets
and liabilities of the insured depository
institution, and every entity that
controls it, must be equal to or less than
five percent of its total consolidated
assets.
Trade associations representing large
commercial banks, community banks,
and credit unions all generally
supported the agencies’ proposal to
implement the community bank relief
provision under section 203 of
EGRRCPA.14 Some commenters cited,
among other considerations, the
statute’s plain meaning, legislative
history, and policy considerations for
their support of the proposal.15 Certain
other commenters suggested that section
203 extended relief to firms with either
$10 billion or less in total consolidated
assets or trading assets and liabilities
equal to 5 percent or less of total
consolidated assets.16 Under these
commenters’ view of section 203, many
banks with total consolidated assets
well over $10 billion, including certain
global systemically important banks (G–
SIBs) with over $250 billion in total
consolidated assets, would be exempt
from section 13 of the BHC Act.
After considering these comments, the
agencies are not persuaded by the
argument that the exclusion under
section 203 of EGRRCPA extends to
institutions with total consolidated
assets in excess of $10 billion. The
agencies believe that the statute requires
an institution to satisfy both criteria to
qualify for the exclusion. This approach
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jbell on DSK3GLQ082PROD with RULES
5 See ‘‘Proposed Revisions to Prohibitions and
Restrictions on Proprietary Trading and Certain
Interests in, and Relationships With, Hedge Funds
and Private Equity Funds,’’ 83 FR 33432 (July 17,
2018).
6 See Economic Growth, Regulatory Relief, and
Consumer Protection Act, Public Law 115–174,
sections 203, 204 (May 24, 2018). These provisions
were effective upon EGRRCPA’s enactment.
7 Section 3(c)(2) of the FDI Act defines an insured
depository institution to include any bank or
savings association the deposits of which are
insured by the FDIC under the FDI Act. 12 U.S.C.
1813(c)(2).
8 12 U.S.C. 1813(c)(2), 1851(h)(1).
9 Section 203 amended section 13(h)(1)(B) of the
BHC Act by excluding certain institutions from the
term ‘‘insured depository institution’’ exclusively
for the purposes of section 13. Insured banks and
savings associations that qualify for this exclusion
for the purposes of section 13 of the BHC Act
remain insured depository institutions under
section 3(c)(2) of the FDI Act. Additionally, an
institution that meets the criteria to be excluded
from the definition of insured depository institution
under EGRRCPA may still be a banking entity by
virtue of its affiliation with another insured
depository institution or a company that is treated
as a bank holding company under section 8 of the
IBA.
10 The terms ‘‘hedge fund’’ and ‘‘private equity
fund’’ are defined at 12 U.S.C. 1851(h)(2). See also
12 CFR 44.10(b); 12 CFR 248.10(b); 12 CFR
351.10(b); 17 CFR 255.10(b); 17 CFR 75.10(b)
(defining ‘‘covered fund’’ for purposes of the 2013
final rule).
11 12 U.S.C. 1851(d)(1)(G)(vi) (2017).
12 12 U.S.C. 3106.
13 ‘‘Proposed Revisions to Prohibitions and
Restrictions on Proprietary Trading and Certain
Interests in, and Relationships With, Hedge Funds
and Private Equity Funds,’’ 84 FR 2778 (Feb. 8,
2019).
14 See American Bankers Association;
Independent Community Bankers of America;
National Association of Federally-Insured Credit
Unions; California Bankers Association.
15 Los Huertos and Mount; National Association
of Federally-Insured Credit Unions.
16 See Competitive Enterprise Institute;
Competitive Enterprise Institute et al.;
Luetkemeyer; Matthew Thomas.
and implementation of section 13 of the
BHC Act.5
The Economic Growth, Regulatory
Relief, and Consumer Protection Act
(EGRRCPA) amended section 13 of the
BHC Act by modifying the definition of
‘‘banking entity’’ to exclude certain
community banks and their affiliates
from section 13’s restrictions and by
permitting an investment adviser that is
a banking entity to share a name with
a hedge fund or private equity fund that
the banking entity organizes and offers
under certain circumstances.6
Prior to the enactment of EGRRCPA,
the definition of ‘‘banking entity,’’ for
purposes of section 13 of the BHC Act,
included any insured depository
institution, as defined in the Federal
Deposit Insurance Act (FDI Act),7 any
company that controls an insured
depository institution, or that is treated
as a bank holding company for purposes
of section 8 of the International Banking
Act of 1978 (IBA), and any affiliate or
subsidiary of such entity (excluding
from the term insured depository
institution certain insured depository
institutions that function solely in a
trust or fiduciary capacity, subject to a
variety of conditions).8
Section 203 of EGRRCPA, entitled
‘‘Community bank relief,’’ modified the
scope of the term ‘‘banking entity’’ to
exclude certain community banks and
their affiliates. Specifically, under
section 203, the term ‘‘insured
depository institution’’ no longer
includes any institution that does not
have, and is not controlled by a
company that has: (i) More than $10
billion in total consolidated assets; and
(ii) total trading assets and trading
liabilities, as reported on the most
recent applicable regulatory filing filed
by the institution, that are more than 5
percent of total consolidated assets.
Therefore, an insured depository
institution and its affiliates generally are
not ‘‘banking entities’’ if the insured
depository institution and each
affiliated insured depository institution
meets the statutory exclusion.9
However, EGRRCPA did not amend the
definition of ‘‘banking entity’’ as it
relates to a company that is treated as
a bank holding company for purposes of
section 8 of the IBA. Accordingly, the
statutory exclusion does not apply to a
foreign banking organization with a U.S.
branch or agency, which continues to be
subject to the prohibitions in section 13
of the BHC Act.
Section 204 of EGRRCPA revised the
restrictions applicable to the naming of
a hedge fund or private equity fund 10 to
permit an investment adviser that is a
banking entity to share a name with the
fund under certain circumstances. Prior
to enactment of EGRRCPA, section 13
provided that a banking entity (or an
affiliate of the banking entity), including
an investment adviser, that organized
and offered a hedge fund or private
equity fund could not share the same
name or a variation of the same name
with the fund (the name-sharing
restriction).11 Section 204 of EGRRCPA
amended the name-sharing restriction to
permit a hedge fund or private equity
fund organized and offered by a banking
entity to share the same name or a
variation of the same name as a banking
entity that is an investment adviser to
the hedge fund or private equity fund,
if: (1) The investment adviser is not an
insured depository institution, a
company that controls an insured
depository institution, or a company
that is treated as a bank holding
company for purposes of section 8 of the
IBA; 12 (2) the investment adviser does
not share the same name or a variation
of the same name with any such
entities; and (3) the name does not
contain the word ‘‘bank.’’
On February 8, 2019, the agencies
published a notice of proposed
rulemaking (the proposal) to revise the
2013 final rule consistent with the
EGRRCPA statutory amendments.13 For
the reasons discussed below, the
agencies are now adopting the proposal
as final without change.
II. Description of the Final Rules
A. Definition of Banking Entity
Consistent with the proposal, the
agencies are modifying the definition of
‘‘insured depository institution’’ in
§ __.2(r) of the 2013 final rule to
conform that definition with section 203
of EGRRCPA. Under this revised
definition, an insured depository
institution must satisfy two conditions
for it and its affiliates to qualify for the
exclusion. First, the insured depository
institution, and every entity that
controls it, must have total consolidated
assets equal to or less than $10 billion.
Second, total consolidated trading assets
and liabilities of the insured depository
institution, and every entity that
controls it, must be equal to or less than
five percent of its total consolidated
assets.
Trade associations representing large
commercial banks, community banks,
and credit unions all generally
supported the agencies’ proposal to
implement the community bank relief
provision under section 203 of
EGRRCPA.14 Some commenters cited,
among other considerations, the
statute’s plain meaning, legislative
history, and policy considerations for
their support of the proposal.15 Certain
other commenters suggested that section
203 extended relief to firms with either
$10 billion or less in total consolidated
assets or trading assets and liabilities
equal to 5 percent or less of total
consolidated assets.16 Under these
commenters’ view of section 203, many
banks with total consolidated assets
well over $10 billion, including certain
global systemically important banks (G–
SIBs) with over $250 billion in total
consolidated assets, would be exempt
from section 13 of the BHC Act.
After considering these comments, the
agencies are not persuaded by the
argument that the exclusion under
section 203 of EGRRCPA extends to
institutions with total consolidated
assets in excess of $10 billion. The
agencies believe that the statute requires
an institution to satisfy both criteria to
qualify for the exclusion. This approach
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