SFA is pleased that today, the federal regulatory agencies announced proposed changes to the Volcker Rule that will modify and clarify requirements related to the Covered Fund Provisions of the rule. These changes will ease banks’ compliance burdens and permit additional fund activities that do not present risks that the Volcker Rule was originally intended to address. It was meant that securitization would be explicitly exempt from restriction under the rule, but there have been negative consequences for our market. SFA has sought relief on certain covered fund aspects of the rule to alleviate this impact. A couple of these areas are addressed in the proposal: 1) under the Loan Securitization Exemption allowing a vehicle to hold up to five percent of assets in non-loan assets, and 2) changes to the definition of “ownership interest” and providing a safe harbor on holding senior debt and loans. SFA is studying the proposal to fully assess the impact to the industry and identify areas to seek additional clarity.

SFA welcomes the opportunity to provide further comments to the joint agencies and offer solutions on aspects of the rule that hinder securitization and banking activities that the rule was never intended to cover. If you would like to join our Securitization and Covered Funds Task Force, please email the SFA Team.