Sun, Feb 25, 2018
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

President Obama proposes limits on bank proprietary trading and size of liabilities of financial firms

Friday, January 22, 2010
Opalesque Industry Update - From international law firm Clifford Chance:

President Obama today proposed two new restrictions on financial firms:

- first, no bank or firm that owns a bank would be allowed to own, invest in or sponsor a hedge fund or private equity fund or engage in proprietary trading operations unrelated to serving customers; and

- second, the growth of the largest financial firms would be limited through an imposition of a cap on the market share of their liabilities.

The President announced he would work with Congress to get appropriate financial reform legislation adopted. The proposed restrictions would not be effective immediately.

Discussion

Funds: It appears the proposal's intent is to restrict the ability of financial companies that own a bank to invest in, and even sponsor, a private equity fund or a hedge fund. The proposal has yet to be described in meaningful detail but, based on the short Presidential statement, it is likely to have far reaching implications for the funds business of US banking organizations.

Proprietary Trading: A critical issue will be how "proprietary trading" is defined. The proposal specifically refers to proprietary trading unrelated to serving customers, which suggests that exposure incurred by banks as dealers would not be restricted. The proposal itself has no additional details.

Growth Limit: The proposed restriction on growth through liabilities limits is also not described in any detail in the proposal. The proposal states that the liabilities limits will supplement existing limits on the market share of deposits, so the structure of the liabilities limits may follow that of the deposit limit. Currently, a merger transaction between two banking organizations may not be consummated if following the acquisition the resulting institution would control more than 10% of the total amount of deposits in insured US banks.

Next Steps: The next step for the proposed restrictions is for consideration by Congress. It is difficult to predict whether these restrictions will make it into final financial reform legislation in their current form or whether they would even be a part of the final legislation. If they become part of the final legislation, it is likely that they will be watered down through compromise and it is also likely that some activities will be grandfathered. As with consideration of all of the proposals for regulatory reform, the next few months in Congress will be critical.


Clifford Chance Client Memorandum: Source


Bg

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Art & Motion launches collectible car alternative investment vehicle[more]

    Komfie Manalo, Opalesque Asia: Luxembourg-based Art & Motion has launched a new investment vehicle dedicated to vintage cars and exceptional high-quality vehicles as this collectible market has grown exponentially the turn of the centu

  2. Opalesque Exclusive: Global Sigma captures February's long-vol trade[more]

    Bailey McCann, Opalesque New York for New Managers: Florida-based Global Sigma rode February's volatility to new highs. The firm's AGSF strategy is up +2.8 percent through February 16 and +4.2 percent YTD a

  3. Institutional Investors - Hedge funds regain their appeal for a $57 billion asset manager, Private credit strategies in stratosphere[more]

    Hedge funds regain their appeal for a $57 billion asset manager From Bloomberg.com: With volatility back on the radar, one of the Nordic region's biggest asset managers is considering relying a bit more on hedge funds to help oversee his portfolio. Mikko Mursula, the chief investment off

  4. Investing - All aboard for hedge funds as trade tide lifts shipping, Hedge funds pile into Time Warner in bet on merger success[more]

    All aboard for hedge funds as trade tide lifts shipping From Reuters.com: Forced to abandon ship after mistiming their investments five years ago, hedge funds are venturing back in a bid to profit from growing global trade flows. Around 90 percent of traded goods by volume are tran

  5. Investing - Hedge funds turn short on tech just as stock rally takes off, After biggest short, speculators slash bearish US bond bets as supply deluge looms[more]

    Hedge funds turn short on tech just as stock rally takes off From Newsmax.com: A key group of investors has just missed out on the biggest tech-stock rally since 2014. Hedge funds and other large speculators turned net short on Nasdaq 100 Index futures for the first time in 21 months, ac