Fed backs easing restrictions on Volcker’s rule in big-bank trade

WASHINGTON-Large bank operators would have more freedom to buy and sell without worrying about Volcker's rule under the proposed changes unanimously approved by the Federal Reserve on Wednesday.

The proposal, known as Volcker 2.0, would relax the compliance requirements for all banks, although it would grant more relief to companies with small trading departments. It is expected that four other US agencies. UU Follow the Fed by proposing changes during the next week. They will take public comments before completing the rule.

"This proposal represents our best first effort to simplify and adapt the Volcker rule", Vice President of Supervision of the Fed.

Randal Quarles

he said at the Fed board meeting.

The Fed said regulators are making the changes because the existing Volcker rule is too expensive and unclear. The rule, named after the former president of the Federal Reserve

Paul Volcker,

It was adopted after the financial crisis and excludes banks from speculative activities similar to hedge funds. Banks can trade according to customer demand.

In practice, judging the intention of operators has been difficult for regulators and bankers. Many observers say that financial markets do not work as well because big banks are nervous that certain positions violate Volcker's rule. At the same time, many large banks have reduced commercial operations in search of more stable sources of income.

Wednesday's proposal would remove the presumption that positions held for less than 60 days violate the norm unless bankers prove otherwise, a change that could give traders more freedom. Instead, regulators would see how trading positions are defined under accounting rules. It will also verify that the trading desks operate within the established risk limits, without variations in the profits or losses exceeding $ 25 million over a period of 90 days.

The proposal also redefines the activities of permitted coverage and market creation with a view to clarifying them, and seeks to reduce the impact of the rule on the foreign activities of foreign banks.

Regulators are also proposing to create three new bank categories. Those with more than $ 10 billion in trading badets and liabilities would face the highest expectations under Volcker's rule. Companies with between $ 1 billion and $ 10 billion in trading badets and liabilities would have a "moderate" compliance, said the Fed. These two categories comprise about 40 companies and 98% of the bank's total commercial activity. from the USA UU., The Fed said.

Firms below the $ 1 billion level were supposed to comply with the rule and would no longer be required to have their chief executive witness Volcker rule compliance.

Write to Ryan Tracy at [email protected]


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