Banks Try on New Volcker Rule, Like Its Wiggle Room: QuickTake

Former Federal Reserve Chairman Paul Volcker had a seemingly simple idea for making banks safer after they brought the global economy to the brink of collapse in 2008 and had to be rescued with taxpayer money: Restrict federally insured lenders from engaging in speculative trading that can trigger huge losses. A decade later, his namesake Volcker Rule, authorized by the 2010 Dodd-Frank financial reform law, has turned out to be anything but simple, resulting in lobbying by banks for a major rewrite. The Donald Trump administration agrees, and so do its financial regulators. The Fed and four other regulatory agencies are proposing changes to give banks greater leeway to trade without running afoul of the rule.

Wall Street hated the 2013 regulation even before the ink was dry. Banks complained that it was almost impossible to decipher which trades were permitted and which were prohibited. While regulators have long signaled they don’t entirely disagree, it wasn’t until Trump’s rule-cutting agenda swept through Washington that watchdogs decided to do something about it. The regulators’ proposal would reduce banks’ compliance costs, tailor regulatory burdens to the size of a bank’s trading book and give lenders more clarity on how to comply.