Jan. 19 (Bloomberg) -- Canada’s five main banks are seeking exclusions from the so-called Volcker rules in the U.S. for investment funds sold by the Canadian lenders to clients living temporarily in the U.S.
“The agencies should adopt an exclusion for Canadian Public Funds from the proposed definition of ‘covered fund’,” the lenders said in a statement sent today to agencies including the Federal Deposit Insurance Corp.
Canadian banks sponsor and manage about C$321 billion ($317.3 billion) of the C$773.7 billion Canadian public fund industry, the lenders said. The banks that wrote the letter are Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and Toronto-Dominion Bank.
The proposed rule named for former Fed Chairman Paul Volcker, who championed the idea as an adviser to President Barack Obama, would ban banks from proprietary trading while allowing them to continue short-term trades for market-making or hedging. It would also limit investments in private-equity and hedge funds.
The Canadian lenders say they need an exemption from the rules as they relate to funds because they sell investment products to clients who spend part of the year in the U.S., such as retired “snowbirds” who flee the Canadian winters.
“If Canadian Public Funds are not excluded from the definition of “covered fund” as requested above, and if these conditions of the foreign fund exemption are not changed, Canadian Banks would effectively be precluded from continuing to sponsor or invest in Canadian Public Funds because they would be unable to meet the conditions of the foreign fund exemption,” the banks wrote.
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