Volcker rule changes approved by federal regulators

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Federal financial regulators have finalized changes to the Volcker rule that are designed to simplify compliance requirements.

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The Volcker rule, which was established as part of the Dodd-Frank Act, was enacted in 2013 to prohibit banking entities from engaging in proprietary trading or investing in or sponsoring hedge funds or private equity funds.

The amended rule would alter the rule’s compliance requirements based on the size of a firm’s trading assets and liabilities. Specifically, firms that don’t engage in significant trading activities will have simplified and streamlined compliance requirements. However, institutions that do have significant trading activity will be subject to more stringent compliance requirements. Community banks are exempt from the Volcker rule. The revisions continue to prohibit proprietary trading. The regulatory agencies expect that the universe of trades that are considered prohibited proprietary trading will remain generally the same as they were previously.

Opponents of the revisions, like Sen. Jeff Merkley (D-OR), who helped draft the rule, said the changes will weaken consumer protections.

The changes were developed and approved by the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission.

The rules will take effect on Jan. 1, 2020. The compliance date is set for Jan. 1, 2021.

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