What is the Volcker Rule?

The Volcker Rule is an economic reform in the US that forbids banks from engaging in speculative practices such as investing customers’ deposits for their own gain. The rule seeks to eliminate conflict of interest trading.

Where have you heard about the Volcker Rule?

It was implemented to bring more transparency to the banking sector in the US following the financial meltdown in 2008, and is part of the Dodd-Frank Wall Street Reform Act, which brought about significant changes to financial regulation. It’s named after Paul Volcker, former chairman of the Federal Reserve.

What you need to know about the Volcker Rule...

Under the Volcker Rule, banks can no longer make speculative investments, such as owning or investing in hedge funds and private equity deals, if these investments are made on their own behalf and not to benefit customers.

The original version of the policy was quite strict, but the final version of the reform bill was watered down somewhat at the request of several legislators who were lobbied by the big banks. The rule finally came into effect on April 1, 2014.