Regulators Come Together on Volcker Rule Adoption
This past week, five regulatory agencies empowered with implementing the controversial Volcker Rule, a provision of Wall Street Reform, approved the final rule. US Regulators have taken a major step toward completing the Dodd-Frank Wall Street Reform and Consumer Protection Act, which still has a significant number of rules pending and being revised. The Volcker Rule will change the behavior and practices in the financial markets to safeguard taxpayers/investors from risks created by banks’ proprietary trading operations, investments in hedge funds and private equity funds.
The Volcker Rule was initially proposed to put an end to banks’ ability to engage in high-risk activities solely for their own benefit, while reaping the advantages by deposit insurance and other government protections. The process that required the five financial regulators to work together created a final rule, which is tough but has workable restrictions and continues to allow banks to perform their essential market functions. The regulators approved a single rule that is clear and consistent to understand.
The lessons learned from the recent financial crisis are an ongoing process to remain vigilant against certain types of market behavior and market manipulation that threaten the stability of the financial system. With the completion of this rule, huge strides are being made, clearly a bit slow going, but demonstrating the commitment of both private entities and public officials/agencies to not repeat past mistakes.