Fed gives banks 2 years to comply with the Volcker Rule
The Federal Reserve finalized a rule that gives banks two years to comply with a Dodd-Frank Act provision that prohibits banks from risking their own capital by engaging in the proprietary trading of securities, derivatives or high-risk financial instruments associated with private equity and hedge funds. The new guideline, known as the Volcker Rule, is named after former Federal Reserve Chairman Paul Volcker and is considered a key provision of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation allocated the responsibility of instructing banks on how to implement the rule to the central bank's board. On Wednesday, the Fed finalized a rule proposed in November that gives banks two years to comply. The board established the rule with guidance from the Treasury Department, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. The provision takes effect April 1 and will be published in the Federal Register soon. In terms of compliance, a few major banks have already cut ties with the business segments addressed in Volcker. In September, JPMorgan Chase (JPM: 45.11 0.00%) said it was closing its proprietary commodities trading division, and Morgan Stanley (MS: 30.08 0.00%) started to wind down its stake in the FrontPoint Partners hedge fund after the Dodd-Frank act was signed last July. Write to Kerri Panchuk.