Volcker 2.0: The Promise and Pitfalls for Non U.S. Banks of Proposed Amendments to the Volcker Rule
On June 5, 2018, five U.S. financial regulators (the “Agencies”) proposed amendments to the regulations implementing Section 13 of the Bank Holding Company Act of 1956 (the “BHCA”), commonly known as the “Volcker Rule” (the “Proposed Rule”).1 If adopted as-is, the Proposed Rule would make significant changes to many aspects of the Volcker Rule’s current implementing regulations 2 (the “Existing Regulations”), particularly with respect to the Volcker Rule’s prohibition on proprietary trading, though it would not fundamentally restructure the Existing Regulations.
The Volcker Rule applies to any non-U.S. bank that has a U.S. branch, agency or bank subsidiary, along with all of its affiliates around the world.2 As a result, the Volcker Rule has had a vast extraterritorial impact on non-U.S. banks, and has required most internationally active banks to adopt complicated compliance programs that have impacted their trading, asset management and structured finance operations around the globe. The Proposed Rule would take a number of steps to scale back that extraterritorial impact, particularly with respect to trading operations outside of the United States. At the same time, the Proposed Rule could actually capture more of a non-U.S. bank’s trading in certain circumstances.
This note does not provide a comprehensive review of all aspects of the Proposed Rule; instead it focuses on those that are likely of greatest practical and commercial consequence for non-U.S. banks.