Joint Notice of Proposed Rulemaking Implementing the Volcker Rule

13 February 2012

In EBF's view, the Proposed Rule's interpretation of the statutory exemptions for activities conducted "solely outside the United States" is inconsistent with the plain language of the statute, congressional intent, and the Volcker Rule's policy objectives.

The Volcker Rule generally prohibits banking entities, including international banks, from (a) engaging in proprietary trading or (b) sponsoring, or acquiring or retaining an ownership interest in, a “private equity fund” or a “hedge fund” (“covered funds”), in each case subject to certain exemptions. Congress deliberately and appropriately limited the extraterritorial effects of the Volcker Rule by permitting international banks to engage in proprietary trading, and to sponsor and invest in covered funds, pursuant to BHCA Sections 4(c)(9) and 4(c)(13) solely outside the United States (the “Non-US Trading and Fund Provisions”).

Limiting the territorial scope of the Volcker Rule’s prohibitions to the United States is consistent with the policy objectives of the Volcker Rule, which focus on protecting US banks, US financial stability and US taxpayer funds from what Congress deemed to be inappropriate risks. It is also consistent with longstanding principles of international bank supervision, reflected in US law and decades of rulemaking and interpretation by the federal banking agencies, which limit the extraterritorial application of US banking law and accord appropriate deference to home country regulators.

Full notice

© EBF