Financial regulators modify Volcker rule (2024)

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Financial regulators modify Volcker rule? ›

Five federal regulatory agencies today finalized a rule modifying the Volcker rule's prohibition on banking entities investing in or sponsoring hedge funds or private equity funds—known as covered funds.

The regulations have been developed by five federal financial regulatory agencies, including 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 regulations have been developed by five federal financial regulatory agencies, all described above: the Federal Reserve Board; the CFTC; the FDIC; the OCC; and the SEC. Federal Deposit Insurance Corp.

The Fed recognizes this and in January 2020, proposed a set of changes to the Volcker Rule. The rule changes were finalized by five federal agencies on June 25, 2020 and included tweaks and additions to what can be excluded from the definition of a covered fund.

As used in the Volcker Rule, financial instruments consist of the following: securities, including options on securities; derivatives (including swaps and security-based swaps), including options on derivatives and forwards;⁷ or. commodity futures, or commodity futures options.

The primary financial regulator bodies in India include: Reserve Bank of India (RBI) Securities and Exchange Board of India (SEBI) Insurance Regulatory and Development Authority of India (IRDAI)

The FCA regulates all other firms for prudential purposes. These firms include, for example, investment firms, asset managers, hedge funds, brokers, financial advisers, insurance intermediaries, consumer credit firms and payment providers. These firms are called "solo-regulated firms."

Volcker did not seek a third term at the Fed and was succeeded by Alan Greenspan. After his retirement from the Board, he chaired the Economic Recovery Advisory Board under President Barack Obama from 2009 to 2011 during the subprime mortgage crisis.

Volcker was appointed chairperson of the Fed in August 1979 by President Jimmy Carter, as replacement for William Miller, who Carter had made his treasury secretary.

Volcker served as president of the Federal Reserve Bank of New York from 1975 to 1979, and in 1979 U.S. Pres. Jimmy Carter appointed him to head the Federal Reserve System at a time when inflation in the United States had reached a high of almost 13 percent.

What activities are prohibited by the Volcker Rule? ›

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with a hedge fund or private equity fund.

Personal Risk: One of the significant drawbacks of prop trading is the potential personal financial risk. If a trader doesn't perform well, they may lose their deposit, and in some cases, their job. Loss Limitations: Prop firms often implement daily loss limits to protect their capital.

The final rules permit a banking entity to continue to engage in proprietary trading in U.S. government, agency, state, and municipal obligations. They also permit, in more limited circ*mstances, proprietary trading in the obligations of a foreign sovereign or its political subdivisions.

An activity or investment occurs solely outside of the United States if: (i) the banking entity (including relevant personnel) acting as principal in the purchase or sale is not located in the United States or organized under U.S. law; (ii) the banking entity (including relevant personnel) that makes the investment ...

In his first term, Volcker focused on reducing inflation and conveying to the public that increased interest rates were the result of market pressures and not Board actions. He raised the discount rate by 0.5 percent shortly after taking office.

Loosely put, the Rule defines a covered fund as anything considered an investment company in the Investment Company Act, including private equity and hedge funds, as well as commodity pools with certain exclusions, and funds sponsored by a US banking entity where the affiliate holds ownership interests.

The Securities and Exchange Commission (SEC) oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds in an effort to promote fair dealing, the disclosure of important market information, and to prevent fraud.

The Reserve Bank of India, is the custodian of the country's foreign exchange reserves and is vested with the responsibility of managing their investment. The legal provisions governing management of foreign exchange reserves are laid down in the Reserve Bank of India Act, 1934.

The EGRRCPA added a major exception to the proprietary prohibition for smaller banking institutions. The Act allows banks to invest up to 5% of their assets in proprietary trading if the bank and their owners control less than $10 billion in assets.

CFTC-Regulated Broad-Based Security Index Futures

The offer and sale of futures contracts (and options thereon) on broad-based security indices in the United States are regulated exclusively by the Commodity Futures Trading Commission (CFTC).