The White House’s propsed banking rules aim, in part, to keep banks from investing in private equity in order to reduce the risk inherent in their portfolios. The Wall Street Journal “Venture Capital Dispatch” notes a perhaps unintended consequence of the proposed rule could prohibit banks from investing in Community Development funds. Banks have been a significant source of investment for these funds that seek to benefit to the local economy by providing seed and sometimes Series A financing to area startups. Hopefully, an exception addressing this issue gets included in the final regulations.

Bank Rules Could Sink Community Development VC Funds