WASHINGTON, DC – The National Venture Capital Association (NVCA) was pleased to see that today’s proposal from the Federal Reserve to simplify the Volcker Rule includes questions on whether the rule’s exclusion of banks from investing into U.S. venture capital funds should be revised. Currently, the Volcker Rule prohibits U.S. financial institutions from investing into venture capital funds as limited partners. This has had a disproportionate impact on cities and regions with emerging entrepreneurial ecosystems—areas outside of Silicon Valley and other traditional technology centers.

“We’re pleased to see that federal regulators are asking a critical question about the wisdom of prohibiting banks from investing into venture funds,” said Bobby Franklin, NVCA President and CEO. “Revising this part of the Volcker Rule would particularly help startups in emerging ecosystems grow and scale their businesses and subsequently create jobs in their local economies. We look forward to working with federal regulators to make common-sense changes that will once again allow banks to seed venture capital funds in their local communities.”

The comment period for the proposed revisions to the Volcker Rule is expected to last 60 days, during which NVCA will submit comments on how the revisions should include an exemption for venture capital funds from the definition of “covered fund,” which governs the prohibition on a banking institution’s ability to contribute capital to private funds. Last fall, NVCA recommended changes to the Volcker Rule in a submission to the Office of the Comptroller of the Currency (OCC), which can be viewed here.