On December 18, 2014, the Board of Governors of the Federal Reserve System (“Board”) issued an order extending for an additional year – i.e., until July 21, 2016 – the Volcker Rule conformance period for banking entities to conform their investment in and relationships with covered funds and with foreign funds that may be subject to the Volcker Rule, and that were in place prior to December 31, 2013 (“legacy funds”). The order also announces the Board’s intention to grant the final one-year extension of the conformance period pursuant to its authority until July 21, 2017.1 The order is available here. No extension was granted for the conformance period for proprietary trading, which still will expire on July 21, 2015.

RATIONALE -

Public commenters had requested an extended period of time to allow banking entities to conform to the Volcker Rule or divest covered fund investments. Conformance with the Volcker Rule will require, among other things, banking entities to discontinue certain prohibited relationships with covered funds and obtain appropriate consents from and make disclosures to investors in such funds. In the Board’s view, the extensions allow for the divestiture of fund investments in an orderly manner consistent with protecting the safety and soundness of banking entities, reduce potential disruptive effects that significant divestitures of covered funds could have on markets, allow banking entities additional time to conform their relationships with covered funds, and are consistent with the legislative history of Section 619 of the Dodd-Frank Act.