Changes to the Volcker Rule

On August 20th, the Office of the Comptroller of the Currency (OCC) announced that they, along with the Federal Deposit Insurance Corporation (FDIC), had approved amendments to the Volcker Rule, an important regulation that prevents certain financial institutions from participating in proprietary, or “prop”, trading and limits their involvement with covered funds. The new amendment, which is expected to be approved by other federal regulators soon, would ease some of these exclusions and eliminate a “rebuttal presumption” that labels financial instruments being held for less than sixty days “prop” trading.

History

The Volcker Rule came about as a response to the financial crises that the US has endured. Following the Great Depression and the Great Recession, regulators tried to find ways to prevent federally insured banks from making certain types of potentially risky investments. The Volcker Rule came on the heels of the Great Recession as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, creating rules for implementing section 13 of Bank Holding Company Act of 1956, which is an act of congress that restricts bank holding companies from certain actions.

The Volcker Rule came into effect in April of 2014 with full compliance required before July 21, 2015. However, things quickly became complicated as discerning the difference between regular trading and “prop” trading became difficult. The Volcker Rule has subsequently proven to be one of the harder regulations to implement and in 2018, the Federal Reserve Board unanimously decided to push forward the proposal loosening some of the Volcker Rule’s restrictions. The goal was to streamline the requirements of the rule, making compliance much easier, specifically for banks that do very little trading.

Changes

These changes to the Volcker Rule would not remove the restrictions placed but relax them to allow certain institutions to more easily comply with The Rule. With another potential recession looming on the horizon, it will be interesting to see how the Volcker Rule may or may not change over the coming months and years.

The ever-changing landscape of financial regulation makes it difficult for banks to keep to relevant compliance training. As rules change, your compliance training should be changing too. Our team at Banker’s Academy are experts in compliance training and do our best to stay ahead of the curve as banking regulations change. That’s why you need to be sure you’re trusting your compliance training to us. If you’re interested in effective, relevant compliance training for your financial institution, contact our team today!