UPDATE 1-U.S. bank group launches Volcker rule legal challenge
By Sarah N. Lynch
WASHINGTON Dec 23 (Reuters) - The American Bankers Association on Monday initiated a legal challenge to a provision of the "Volcker rule" that restricts bank ownership of certain investments.
The group filed a petition for review in the U.S. Court of Appeals for the District of Columbia Circuit, according to court papers.
The court filing, the first legal challenge to the Volcker rule, says the provision in question is, among other things, "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law."
CB&T Bancshares Inc and its Citizens Bank and Trust Co subsidiary also signed on to the court filing, as did MBT Financial Corp and its Monroe Bank and Trust Co subsidiary.
Earlier in the day, Frank Keating, the chief executive of the ABA, wrote in a letter to regulators that the group would file a challenge seeking emergency relief.
An ABA spokesman said the two-page petition for review would be followed by more detailed papers, to be filed as early as Tuesday morning, that would outline the group's legal argument in greater detail.
At issue is a provision of the rule that prohibits banks from owning more than 3 percent of any individual hedge fund or private equity fund, and bars banks from investing more than 3 percent of their total equity capital in private funds. Continued...