Thu, Nov 26, 2015
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.


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


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. Other Voices: Hedge fund marketing and the selling cycle[more]

    By Bruce Frumerman. How long is the selling cycle now? That’s a question my financial communications and sales marketing consulting firm has been asked on a regular basis by hedge fund firm owners and sales people, ever since we opened the doors to our firm in 1987 pre-crash. Wa

  2. Investing - BlackRock targets ETF investors with flexible currency hedging, Nelson Peltz bets on General Electric Company and Mondelez International, Apple plummets to 4th place among hedge holdings, from No. 1, Top Q3 equity purchases and sales of top 50 hedge funds[more]

    BlackRock targets ETF investors with flexible currency hedging From BlackRock Inc., the world’s largest asset manager, is changing course on exchange-traded funds that protect against currency volatility. After stressing the easy switch between hedged and unhedged ET

  3. BlackRock is shutting down its Global Ascent macro fund[more]

    Komfie Manalo, Opalesque Asia: BlackRock, the world’s largest asset manager, has announced plans to shut down a macro fund, Global Ascent Fund, because of "headwinds facing the industry". The hedge fund, which makes bets on stock, bond and currency markets, will return money to investors. Ac

  4. Opalesque Roundtable: Seeding deal terms can be onerous for hedge funds[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Executives from fund of funds firms, family offices, a placement agent, a private equity firm, and an accounting firm gathered in Connecticut last month for the

  5. Opalesque Roundtable: Family offices flock to co-investment[more]

    Bailey McCann, Opalesque New York: Co-investments have been a hot topic for pension funds in recent years, as they try to move away from high fees and improve transparency. But now, family offices are more readily getting into the mix and establishing in-house deal teams, according to the delega