Volcker Rule limiting bank risk-taking goes to agency vote Tuesday

[unhappycamper]

http://www.rawstory.com/rs/2013/12/08/volcker-rule-draft-limiting-bank-risk-taking-goes-to-agency-vote-tuesday/



Volcker Rule limiting bank risk-taking goes to agency vote Tuesday
By George Chidi
Sunday, December 8, 2013 21:52 EST

A major cornerstone of financial services reform — limits on the proprietary trading done by regulated banks — faces a ratifying vote by government agencies Tuesday after years of internal wrangling over the terms and scope of the new rules.

Known as the Volcker Rule, the regulation would require banks to refrain from speculative trading in the market for their own gain. Banks would also be prohibited from investing in hedge funds and outside entities that engage in similarly-speculative investments. The rule, named for former Fed Chairman Paul Volcker, is a key part of the Dodd-Frank reforms passed in the wake of the financial crisis of 2008.

The underlying rationale for the rule is that banks should not be adding certain kinds of risk to their portfolios when the public might be expected to shoulder losses in the name of protecting the financial system from systemically-important “too big to fail” entities.

Congress required five regulatory bodies — The Federal Reserve, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission — to draft policies to implement the Volcker Rule. Treasury Secretary Jack Lew gave the agencies until the end of the year to come to terms on implementation.

[Eugene]

1. Regulators Set to Approve Tougher Volcker Rule

Source: New York Times

DECEMBER 9, 2013, 7:03 PM

Regulators Set to Approve Tougher Volcker Rule

BY BEN PROTESS AND PETER EAVIS

Federal regulators are poised to approve a tougher-than-expected version of the so-called Volcker Rule, adopting a harder line in recent weeks against Wall Street risk-taking, according to a copy of the rule reviewed by The New York Times.

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To prevent such blowups, the rule will require banks to deploy “independent testing designed to ensure that the positions, techniques and strategies that may be used for hedging may reasonably be expected to demonstrably reduce” the risks, according to the version reviewed by The Times. And the risks, the rule says, must be “specific, identifiable” rather than theoretical and broad.

When five federal agencies initially proposed the rule in October 2011, those requirements were softer. But even in the last two weeks, the regulators continued to adopt harsher language, people briefed on the matter said.

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Read more: http://dealbook.nytimes.com/2013/12/09/regulators-set-to-approve-tougher-volcker-rule/