Banks required by the Volcker rule to dispose of illiquid funds have five more years to do so, the Federal Reserve Board announced late Monday.
The original deadline was July 21, 2017, and banks must apply for the extensions before then.
Formally known as section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, the rule generally prohibits insured depository institutions and affiliated companies from engaging in proprietary trading and from keeping or acquiring interests in hedge funds or private equity funds. The rules were implemented by the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp., the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The Federal Reserve notice said the regulators expect banks to qualify for the five-year extensions for illiquid funds committed to as of May 1, 2010, except where “the banking entity has not demonstrated meaningful progress to conform or divest its illiquid funds,” has a deficient compliance program or where there are concerns about evasion.
No further extensions are allowed under the law, the board statement said.
The announcement is on the Federal Reserve's website.