BackFed to consider proposal to modify ‘Volcker Rule’ at 30 May meeting
US federal regulators are expected to announce changes easing some of Volcker Rule's requirements, amid complaints from banks they are too onerous and confusing
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Washington: The Federal Reserve will consider a proposal to modify the “Volcker Rule" banning proprietary trading by banks at a 30 May meeting of its board, the central bank announced on Wednesday.
Federal regulators are expected to announce changes easing some of the rule’s requirements, amid complaints from banks they are too onerous and confusing.
The rule, created as part of the 2010 Dodd-Frank financial reform law, bars banks from using funds protected by deposit insurance to make profit-seeking trades if not directed by clients.
The meeting announcement is the first formal step taken by regulators in what is likely to be a lengthy process to rework the rule, which was a central part Dodd-Frank. Five separate federal agencies share responsibility for writing and enforcing it.
Congress passed Dodd-Frank in response to the 2007-2009 financial crisis, placing stronger restrictions on bank activities in a bid to eliminate the need for future bailouts.
The Fed is expected to approve the proposed changes at the 30 May meeting. The public will be invited to weigh in on the proposals.
Regulators are considering a range of changes aimed at making the rule simpler for banks. Among the most significant changes discussed is removing a requirement that banks prove their trading is permitted under the rule. Instead, the altered rule would place the burden on regulators to prove trading is prohibited.
Regulators are also considering simplifying definitions central to the rule, such as what constitutes proprietary trading, and the treatment of overseas funds.
The Fed, Federal Deposit Insurance Corporation (FDIC), Office of the Comptroller of the Currency (OCC), Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) have joint responsibility for enforcing the rule and broadly agree it could be simplified.
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