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Law360 (April 2, 2020, 7:21 PM EDT ) Federal financial regulators said Thursday that they're letting the public take some more time to weigh in on their proposal to pare back Volcker rule restrictions on banks' fund investment activities, citing the "potential disruptions" of the coronavirus pandemic.
In a statement issued the day after public comments were officially due, the five federal agencies in charge of the Volcker rule said they will consider feedback submitted before May 1 on their proposal, which would give banks more flexibility to invest in venture capital funds, credit funds and family wealth management vehicles and make other changes to the rule's so-called "covered funds" provisions.
"The agencies will continue to consider comments to provide interested persons more time to analyze the issues and prepare their comments in light of potential disruptions resulting from the coronavirus," the statement said.
The Federal Reserve, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, U.S. Commodity Futures Trading Commission and U.S. Securities and Exchange Commission released Thursday's statement, which comes amid growing calls for regulators across the federal government to halt most rulemaking and extend open comment periods in light of the COVID-19 crisis.
Those calls are at odds with what some in the banking industry see as an urgent need to finalize this latest package of proposed changes to the Volcker rule, a key post-crisis financial regulation that bans propriety trading by banks and limits their ability to invest in hedge funds and private equity vehicles.
In a comment letter dated Wednesday, the American Bankers Association pointed to the pandemic in arguing that the five Volcker agencies should pursue "expedited approval" of the proposal package, saying the covered funds changes "would allow banking entities to invest in community relief and development efforts and promote capital formation."
But Amit Narang, regulatory policy advocate for Public Citizen, said that while Thursday's statement shows the agencies are sympathetic to concerns that an ongoing national emergency is a bad time to expect meaningful, timely feedback from the public, it also signals their intent to press ahead with their covered funds proposal.
"The proper approach would have been to formally reopen and extend the comment period, until after the pandemic is over," Narang told Law360 in an email. "I think it's obvious the agencies are taking a different approach because they want to be able to continue moving the rule forward, while trying to have it both ways by still accepting comments, because normally agencies wait until after the comment period is over to start developing the final rule and responding to comments."
And if would-be commenters couldn't meet the original deadline because of fallout from the pandemic, it's not clear that gaining an extra month at this point will make it feasible for them to weigh in, according to Narang.
"This approach is highly unusual and inappropriate," Narang said.
--Editing by Jay Jackson Jr.
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