WASHINGTON, DC – The National Venture Capital Association (NVCA) recommended key changes to the Volcker Rule in a proposal submitted yesterday in response to multiple federal agencies’ request for comment regarding the “covered fund” definition under the Volcker Rule. NVCA’s letter outlines the harmful consequences that the broad scope of the covered fund provision has had on the startup ecosystem.

“Congress was rightly concerned about including venture capital in the definition of a ‘covered fund,’” said Bobby Franklin, President and CEO of NVCA. “Unfortunately, the final rules inexplicably banned banks from providing investment to VC funds. While this prohibition does nothing to accomplish the Volcker Rule’s objectives of deterring systemic risk, it has had particularly harmful consequences for entrepreneurial capital formation in emerging ecosystems—areas outside of Silicon Valley and other traditional technology centers. We applaud the willingness of the agencies to review this important issue, and hope they will use their discretionary authority to allow bank investment into venture capital funds and improve entrepreneurial access to capital.”

NVCA’s letter articulates the view that defining “covered funds” to include VC funds is not what Congress intended, that this overly-inclusive definition has harmful economic consequences, and offers proposals to the federal agencies that would correct the issue using the discretionary authority provided to them in the statute. Read the full letter here.