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One rule wraps up a long-running effort by Republicans to overhaul the so-called “Volcker Rule,” clearing the way for banks to make larger investments in riskier funds like venture capital funds.
The second relieves banks from having to set aside cash to safeguard derivatives trades between affiliates within the same firm. The move hands a win to big global banks that had lobbied for the relief, as industry estimates it could free up as much as $40 billion in previously reserved cash.
The rules were jointly unveiled by regulators on Thursday, with each agency expected to formally approve them.
The rule overhauling the “covered funds” portion of the Volcker Rule wraps up years of work overhauling that central post-financial crisis regulation, which places significant restrictions on a bank’s riskier trading and investment activities. The new rule, largely similar to one proposed in January, opens the door to banks investing in venture capital funds, and eases restrictions around when banks are considered owners of funds.
The softer “inter-affiliate” swap rule frees banks from having to set aside funds to protect against derivatives trades made between affiliates of the same firm. The final rule did add to the September proposal, setting a limit on how much inter-affiliate exposure a bank could have without setting aside margin funds of 15% of the firm’s capital.
The pair of moves serve as significant victories for the financial industry, which for years had complained about rules they said were onerous, confusing and overly cautious.
However, the moves adopted on Thursday may also be some of the last significant deregulatory projects under an industry-friendly administration, as President Donald Trump is up for re-election in November.