As anticipated, the FRB and FDIC today approved a controversial proposal joined by the OCC, SEC, and CFTC to expand the covered funds banks may own or support under the Volcker Rule. Also as anticipated, FRB Gov. Brainard and FDIC Director Gruenberg opposed changes to the covered-fund rules that would allow banks to have larger stakes in credit funds and venture capital (VC) entities on grounds that this is contrary to the Volcker Rule, Congressional intent, and hard crisis experience. Mr. Gruenberg also emphasized risks to insured depositories due to liberalization and even repeal of “Super 23A” provisions. Chairman Powell and the rest of the Board as well as FDIC Chair McWilliams and Comptroller Otting supported the NPR, saying it adds simplicity and clarity, with Ms. Brainard and Mr. Gruenberg agreeing with this only with regard to the proposed treatment of foreign banks and extraterritoriality.
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