July 8, 2016

Volcker Rule Conformance Period for Legacy Covered Fund Activities Extended One Year

The Board of Governors of the Federal Reserve System announced yesterday that it has further extended the conformance period under the Volcker rule until July 21, 2017, to allow banking entities to conform their investments in and relationships with covered funds made prior to December 31, 2013 (legacy covered fund activities). Without this extension, the conformance period for legacy covered fund activities was set to expire on July 21, 2016.

In its order, the Federal Reserve Board noted:

  • This extension period does not apply to an investment in or relationship with a covered fund after December 31, 2013, or to proprietary trading activities, since banking entities were required to conform those activities to the Volcker rule as of July 21, 2015.
  • It expects banking entities to make plans well in advance of the end of the extended conformance period regarding the manner in which they will conform or divest their legacy covered fund activities in a safe and sound manner.

The Federal Reserve Board was permitted to grant up to three one-year extensions to the Volcker rule conformance period, and this extension is the third and final one-year extension. The statute also permits the Federal Reserve Board to provide an additional transition period of up to five years to conform activities related to certain illiquid funds, and the Federal Reserve Board has stated that it will continue to consider whether to take action regarding illiquid funds.

For additional information regarding the Volcker rule, please contact Goodwin banking partner William E. Stern.