Though much of the debate surrounding the Dodd-Frank financial reforms has been focused on its effect on big banks, regional banks like PNC Financial Services will also be heavily impacted by certain provisions like the Volcker Rule.
According to Bloomberg, PNC Financial Services would have to rid itself of up to $1.32 billion in invested capital as a result of the Volcker Rule. At the end of 2011, PNC Financial Services held $880 million in private equity and hedge funds with a total invested capital of $441 million, Fierce Finance reports.
The bank said in an annual filing with regulatory agencies that some of the amounts will decrease over time “in the ordinary course of business before compliance is required,” according to Bloomberg.
“A forced sale of some of these investments due to the Volcker [Rule] could result in PNC receiving less value than it would otherwise have received,” the bank said in the filing, Bloomberg reports.
The Volcker Rule prohibits banks from engaging in proprietary trading, or making risky investments with client funds. Some critics argue that the regulations under the Volcker Rule put an unnecessary burden on smaller community and regional banks as they struggle to allocate resources to comply with the rules.
“Any meaningful limitation on PNC’s ability to hedge its risks in the ordinary course or to trade on behalf of customers would likely be adverse to PNC’s business,” the bank said in the filing, according to Bloomberg. “The proposed rules contain extensive compliance and recordkeeping requirements related to permissible trading activities. Such requirements, if included in a final rule, could increase the costs of hedging or other types of permissible transactions.”