As reported by Reuters, The US Federal Reserve introduced a rewrite of the Volcker rule, a simplification of the measure introduced after the 2007 financial collapse that prevents banks from trading on their own accounts in an attempt to curb risk.
Banks have long complained the rule meant to ban lenders that accept U.S. taxpayer-insured deposits from engaging in proprietary trading is too vague and complex. The rewrite seeks to make clear which trades qualify for safe harbors, such as when banks facilitate client trades and hedge risks, and to expand those exemptions. The proposal would also scrap a subjective standard which assumes banks’ short-term trading is profit-seeking unless they can prove otherwise, replacing it with an accounting test.
The Volcker Rule, which took four years to write and runs at around 1,000 pages, has forced many Wall Street banks to overhaul their trading operations and hive off billions of dollars worth of hedge funds and private equity funds.
– Reuters
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