June 25 (UPI) – The Federal Reserve and other financial agencies on Thursday approved changes to the Volcker rule, allowing banks to increase their investments in venture capital funds.
The Fed, along with the Office of the Currency Monitor and the Federal Deposit Insurance Corp. makes the changes clarify what will be allowed. Banks will be able to increase their investments in venture capital funds and earn the money they held to support derivative transactions.
This marked a continued easing of restrictions under President Donald Trump. Last year, the Fed, OCC and FDIC relaxed Volcker restrictions to allow lenders to engage in proprietary transactions. This allows institutions to place bets on the market for themselves rather than on behalf of customers.
The new rule amends “the ban on the Volcker rule on banking entities that invest or sponsor hedge funds or private equity funds, called hedge funds,” the Fed said in a statement. “The final rule is broadly similar to the rule proposed for January.”
The foregoing rule generally prohibits banking entities from engaging in proprietary transactions and acquiring or retaining ownership interests, sponsoring or having certain relationships with a hedge fund or private equity fund.
The Fed said the new rule would streamline the portion of funds covered by the rule, deal with the extraterritorial treatment of certain foreign funds, and allow banking entities to offer financial services and “engage in other activities that do not not raise concerns about the Volcker. address rule. “
This change removes the requirement for banks to maintain a margin for derivatives transactions between subsidiaries, which could free up about $ 40 billion for Wall Street banks. This change includes a limit, requiring that the margin be set aside if it had exceeded 15% of the so-called “level 1” capital under the previous rule.