Volcker Rule: balance sheet hedging and loan-level interest rate hedging

Chatham Financial White Papers – July 2015

 

Chatham believes that under the Volcker Rule, balance sheet hedging and loan-level interest rate hedging, generally do not constitute proprietary trading and therefore are exempt from the requirement for specific compliance programs. We have documented our conclusion in these white papers:

 

With the implementation of the Volcker Rule, the question arises as to the impact of the rule on balance sheet risk management (“BSRM”) hedging programs. The Volcker Rule’s proprietary trading ban is a prohibition on certain short-term speculative trading. As explained in this white paper, trades executed in BSRM hedging programs are not executed for purposes prohibited by the Volcker Rule. As a result, BSRM hedging transactions are typically not “proprietary trading” nor should the BSRM programs themselves be required to implement a compliance regime.

Download the BSRM Volcker White Paper
 

With the implementation of the Volcker Rule, the question arises as to the impact of the rule on loan-level hedging programs. The Volcker Rule’s proprietary trading ban is a prohibition on certain short-term speculative trading. As explained in this white paper, trades executed in traditional loan-level hedging programs are not executed for purposes prohibited by the Volcker Rule. As a result, loan-level hedging transactions are typically not “proprietary trading” nor should the loan-level programs themselves be required to implement a compliance regime.

 
Download the LLH Volcker White Paper