WASHINGTON — In a first stab at reforming the Volcker Rule, federal regulators on Friday announced they would review how it applies to certain foreign funds.

The five agencies in charge of implementing the rule — the Federal Reserve, Commodity Futures Trading Commission, Federal Deposit Insurance Corp., Office of Comptroller of the Currency and Securities and Exchange Commission — said they were “coordinating their respective reviews” of the rule.

According to a joint statement by the three banking regulators, certain foreign funds that were intended to be exempt from the Volcker Rule’s restrictions ended up being caught up in the trading ban.

Former Fed chairman Paul Volcker.
The Volcker Rule, named for former Fed Chairman Paul Volcker, would apply to a foreign fund if it were affiliated with a foreign bank, the agencies said. Bloomberg News

The Volcker Rule, named for former Fed Chairman Paul Volcker, would apply to a foreign fund if it were affiliated with a foreign bank, the agencies noted.

“The staffs of the agencies are considering ways in which the implementing regulation may be amended, or other appropriate action may be taken, to address any unintended consequences of the Volcker Rule for foreign excluded funds in foreign jurisdictions,” they said.

The FDIC, OCC and Fed added that they would refrain from taking action against a foreign bank that might have violated the Volcker Rule because of its involvement with a foreign fund. The grace period would end on July 21, 2018.

This could be the first step in a series of efforts to reform the Volcker Rule. After a speech at an Exchequer Club luncheon Wednesday, acting Comptroller of the Currency Keith Noreika said the regulators would discuss it at an upcoming Financial Stability Oversight Council meeting. He also said his agency would seek public comment to determine other ways to reform the rule.

"My idea is a very simple one," he said. "Issuing an advance notice of proposed rulemaking [to ask] five very basic questions. … What's right with the rule, what's wrong, what would you change, how would you change it and do you have any data to support that.”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.

Lalita Clozel

Lalita Clozel covers fintech regulation, anti-money-laundering, cybersecurity and the Federal Deposit Insurance Corp. in American Banker's Washington bureau.