UPDATE 1-PNC winds down Market Street Funding amid regulatory pressure

Fri Sep 6, 2013 2:40pm EDT

Sept 6 (Reuters) - PNC Financial Services Group Inc said it was winding down Market Street Funding LLC, an investment vehicle that issues short-term debt to fund credit facilities for the bank's clients.

The decision is part of a strategy to diversify and extend PNC's borrowing base in light of ongoing regulatory developments, the company said in a filing with the U.S. Securities and Exchange Commission. ()

A PNC spokesman told Reuters that the regulatory developments mentioned in the filing relate to liquidity coverage ratios, which determine how much liquid assets financial institutions can hold.

As part of the wind-down, commitments and outstanding loans of Market Street will be assigned to PNC Bank. Market Street had $5.9 billion of commercial paper outstanding as of June 30, PNC said in the filing.

Market Street is classified as a variable interest entity (VIE), owned by an independent third party and administered by PNC Bank.

Financial firms have used VIEs to finance investments in subprime mortgage-backed securities while keeping them off the company's books.

PNC said it did not expect the wind-down, which will be completed by the end of the fourth quarter, to have a material impact on the bank's financial condition or results.

The company's shares, which have fallen 5 percent in the last month, were marginally up at $73.53 in afternoon trading on Thursday on the New York Stock Exchange.