On Tuesday August 20, the Federal Deposit Insurance Corp (FDIC) approved a five-agency revision of the Volcker Rule in order to help clarify how banks may trade securities using their own funds, which was previously banned as part of legislation from the post-financial crisis crackdown on bank operations, according to CNBC.
Jelena McWilliams, chairman of the FDIC, stated that “the Volcker Rule [restricts] banks from engagement in proprietary trading and from owning hedge funds and private equity funds.” The rule is extensively complex, and has led to widespread complaints.
Regulators hope to clearly define proprietary trading and adjust the ban on banks making short-term investments using their own capital.
The final rule is intended to remove an “accounting prong” used to determine the types of prohibited trading. This will be replaced with simpler models in accordance with the original rule.
The amount of barred trading is not expected to significantly change, but banks will receive better guidance and the amendment would be a big win for large financial institutions.