Citigroup announced that they are planning to rebuild its equity unit soon. The move is seen as a bold action by the bank considering current economic situation and the "Volcker rule" regulation which limits banks investment in such funds.
Volcker rule
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As banks shed off their private equity units to comply with the Volcker Rule, the executives of these newly-independent firms will find themselves doing more travel in their search for new investors, The Wall Street Journal reported.
A report on Pensions & Investments said 2014 is set to be a very busy year for hedge fund launches because of factors like having experienced teams gearing to form their own companies and having available seed money, among others.
US bank regulators said they would consider allowing banks to hold on to complex securities despite the Volcker rule prohibiting them from owning such and would arrive at a decision in the middle of January.
The American Bankers Association, a group that represents mostly community banks, has filed a complaint challenging the final version of the Volcker Rule, Bloomberg reported.
To follow the requirements of the Volcker Rule, Citigroup Inc sold private equity unit Metalmark Capital, Bloomberg reported. The terms of the deal were not disclosed.
The over 900 pages of preamble and regulations regarding the Volcker Rule appeared to have excluded market-making activities of Wall Street banks, said a Bloomberg report.
Bart Chilton, member of the Commodity Futures Trading Commission, said the Volcker rule on proprietary trades will most likely take in effect before 2015, as said in a Reuters report.
Major banks on Wall Street are extremely anxious about the threat of the final deliberations of the Volcker rule, of which its provisions regarding the definition and exemption of market-making is set to be deliberated soon.
As the Volcker rule for banking and trading is being wrapped up by five US government agencies, politicians and advocates of the controversial Glass-Steagall legislation intended to push a revival of a version of its favored banking act should the former fail to curb risky betting by US banks.
New inclusions to avoid the London Whale scandal is sought to be included in the new Volcker Rules, which may result in failure to meet the mandated year end deadline.
Wells Fargo continues private equity investment activity despite Volcker Rule.
A U.S. regulation that limits how much of its own capital a bank can put at risk is causing headaches for Morgan Stanley as it prepares to raise a new multi-billion-dollar global infrastructure fund.
