On November 6, 2015, the US Board of Governors of the Federal Reserve System, together with the US Office of the Comptroller of the Currency and the US Federal Deposit Insurance Corporation, issued guidance entitled Deduction Methodology for Investments in Covered Funds, in order to reconcile the regulatory capital rule and the Volcker Rule with respect to the capital treatment for investments in certain hedge funds and private equity funds (i.e. covered funds under the Volcker Rule). The Methodology provides banking organizations with guidance on reporting deductions of covered funds under the Volcker Rule as well as a step-by-step process to reconcile the treatment of overlapping tier 1 capital deductions for investments in covered funds required by the Volcker Rule with any regulatory capital rule’s deductions for investments in the capital of unconsolidated financial institutions.

The guidance and press release are available at: http://www.federalreserve.gov/bankinforeg/srletters/sr1513.htm and http://www.federalreserve.gov/bankinforeg/srletters/sr1513a1.pdf.