Sat, Aug 1, 2015
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. Opalesque Exclusive: Despite bumpy June/July, CTAs hold on[more]

    Bailey McCann, Opalesque New York: To say that things have been rocky in managed futures recently is putting it mildly. In June, the industry saw its worst month on a performance basis in the past four years. Then yesterday,

  2. Investing - Hedge fund billionaires bet on London as revival gathers pace[more]

    From Bloomberg.com: London’s fund industry is bouncing back, and U.S. billionaires Steven A. Cohen and Ken Griffin are grabbing a piece of the action. Griffin’s Citadel and Millennium Management, a hedge fund run by Israel Englander, have bulked up in London, where asset growth is outpacing the U.S.

  3. Other Voices: Same day reporting and the evolving role of fund administrators[more]

    By: Scott Price, Head of Business Development and Client Management for North America, Maitland Ernst & Young’s latest glob

  4. Opalesque Roundup: Hedge fund assets rose to 11th consecutive quarterly record level: hedge fund news, week 31[more]

    In the week ending 24 July, 2015, the total global hedge fund industry assets rose to the 11th consecutive quarterly record level in 2Q15 to $2.97tln; Eurekahedge reported that hedge funds raised $93bn in the first six months of 2015; The SS&C GlobeOp Forward Redemption Indicator for July 201

  5. Cowen Group, Inc. to acquire Conifer Securities[more]

    Cowen Group, Inc. and Conifer Securities, LLC had announced the signing of a definitive agreement under which Cowen will acquire Conifer Securities, the prime services division of Conifer Financial Services LLC. The transaction, the terms of which have not yet been disclosed, was approved by the boa

 

banner