Fed Seeks Rewrite of Volcker Rule – NMP Skip to main content

Fed Seeks Rewrite of Volcker Rule

Phil Hall
May 31, 2018
The Federal Reserve Board on is seeking comment on a proposed rule that would rollback restrictions imposed by the Volcker Rule

The Federal Reserve Board on is seeking comment on a proposed rule that would rollback restrictions imposed by the Volcker Rule that prohibits banking institutions from participating in proprietary trading and owning or controlling hedge funds or private equity funds.
In a statement issued by the central bank, the proposed Volcker Rule changes are being floated “to streamline the rule by eliminating or modifying requirements that are not necessary to effectively implement the statute, without diminishing the safety and soundness of banking entities.” Specific changes would readjust the rule's compliance requirements based on the size of a firm's trading assets and liabilities, revise the definition of "trading account" to fit commonly used accounting definitions, clarify that firms that trade within appropriately developed internal risk limits are engaged in permissible activity, streamline the criteria that apply when a banking entity seeks to rely on the hedging exemption from the proprietary trading prohibition, limit the impact of the Volcker Rule on the foreign activity of foreign banks and simplify the trading activity information that banking entities are required to provide to the agencies.
The proposed changes were developed by the Fed along with the other agencies responsible for administration of the Volcker Rule: The Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Securities and Exchange Commission (SEC).
"The agencies responsible for implementing the rule see many opportunities to simplify it and improve it in ways that will allow firms to conduct appropriate activities without undue burden and without sacrificing safety and soundness," said Fed Chairman Jerome H. Powell. "The proposal will address some of the uncertainty and complexity that now make it difficult for firms to know how best to comply, and for supervisors to know that they are in compliance."
One comment already came in from Sen. Elizabeth Warren (D-MA), who took to Twitter to denounce the idea.
“Even as banks make record profits, their former banker buddies turned regulators are doing them favors by rolling back a rule that protects taxpayers from another bailout,” Warren tweeted. “This kind of corruption is common in @realDonaldTrump’s Washington.”

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