US regulators approve Volcker rule

Washington, Dec 11: US Federal Reserve and other four financial regulators Tuesday issued the final version of the Volcker rule to prevent banks from making bets with their own money, Xinhua reported.

The Volcker rule, named after the former Federal Reserve chairman Paul Volcker, is a centerpiece of the Dodd-Frank Act, the overhaul of financial regulation enacted by President Barack Obama in July 2010, to prohibit banking entities from engaging in high-risk activities known as proprietary trading.

The final rule, issued after years of lobbying, wrangling and debating, provides exemptions for certain activities including market marking and risk-mitigating hedging, but imposes limits on banking entities’ investment in hedge funds and private equity funds, the Federal Reserve said in a statement.

Banking entities will be required to fully conform their activities and investments to the Volcker rule by July 21, 2015, said the Fed.

“With today’s approval of the Volcker rule, regulators have taken a critical toward completing implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act,” US Treasury Chief Jacob Lew said in a statement.

“The Volcker rule will change behaviour and practices in our financial markets to safeguard taxpayers from risks created by banks’ proprietary trading and investments in hedge funds and private equity funds,” he added.

The five federal agencies involved in writing the Volcker rule and approving it are the Federal Reserve, the Federal Deposit Insurance Corp (FDIC), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).