Regulators to Loosen Volcker Rule

Chris Gaetano
Published Date:
Aug 1, 2017
By Kenneth C. Zirkel - Own work, CC BY-SA 3.0

Five regulatory agencies―the Federal Reserve, Securities and Exchange Commission, Federal Deposit Insurance Corp., Commodity Futures Trading Commission and the Office of the Comptroller of Currency―said they will work together to loosen the restrictions imposed by the Volcker Rule, a crisis-era regulation that made it more difficult for banks to conduct certain investment activities with their own accounts, according to Bloomberg

The Volcker Rule, named for former Federal Reserve Chairman "Tall" Paul Volcker (he is 6 feet 7 inches tall), who proposed a similar regulation, was developed in the wake of the financial crisis to prevent banks from using customer deposits to make short-term proprietary trading of securities, derivatives, commodity futures and options. This rule is meant to discourage banks from using customer funds to make risky bets that don't directly benefit the customers. Bloomberg said that supporters believe it has made the financial system safer and more stable, but critics said that it's also made banks too risk-averse, which has led to a lack of liquidity. 

While it is currently unknown how the regulation will be changed, a report released in June by Treasury Secretary Steve Mnuchin may give a hint. The report called for significant changes to the rule, saying that banks with less than $10 billion in assets be exempted from the rule completely, and that every lender have more room to trade than they do now. 

As of now, only the Office of the Comptroller of Currency is considering seeking public input for the potential change. 

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