Big bank regulations loosened

The Federal Reserve announced this week that an interagency rule to loosen Volcker rule requirements on big banks has been finalized. NAFCU had urged the agencies to withdraw their proposed rulemaking, arguing that relaxing the requirements could undermine financial stability.

The Federal Reserve was the last of the regulators to approve it; the FDIC, Office of the Comptroller of the Currency, Commodity Futures Trading Commission, and Securities and Exchange Commission previously voted to approve it.

Federal Reserve Governor Lael Brainard, with whom NAFCU has previously met, was the only Fed member to vote against the changes. Brainard expressed concerns that the rule “weakens the core protections against speculative trading within the banking federal safety net.”

The Volcker rule was put in place after the 2008 financial crisis to prevent improper, speculative trading. The final rule clarifies requirements related to bank relationships with covered funds and relaxes certain limits on proprietary trading, which is generally short-term and bears additional risk. It is revised from the proposal, but the changes dropped a bank-opposed provision that would have tied compliance with the rule to an accounting standard.

 

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