Fed Gives Banks Until 2017 To Sell Hedge Fund Stakes

Dec 23 2014 | 8:06am ET – FINalternatives.com

Call it a Christmas present: the Federal Reserve has given banks an extra two years to divest themselves of hedge fund, private equity and venture capital stakes in compliance with the so-called Volcker rule.

That said, it’s not quite what the banks had asked for—they wanted an additional seven years to come into compliance with the regulation, introduced as part of the Dodd-Frank finanical forms in the wake of the 2008 financial crisis.
The deadline has been moved from 2015 to 2017, to “reduce the potential disruptive effects that significant divestitures of covered funds could have on markets,” the Fed said in an order announcing the change.

Named after former Federal Reserve Chairman Paul Volcker, the rule targeted one of the banks’ most profitable businesses and has been the subject of much push-back from bankers.
And the extended Volcker rule deadine is not the only gift Wall Street has received this season—Congress tucked a provision into the recently passed budget deal that would allow banks to continue certain swaps-trading activities within federally insured bank holding companies.
In a statement responding to the delay, Volcker himself said: “It is striking that the world’s leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries, however complicated, apparently can’t manage the orderly reorganization of their own activities in more than five years.”