Volcker Rule

[7] On January 14, 2014, after a lawsuit by community banks over provisions concerning specialized securities, revised final regulations were adopted.

[14] He also argued that the vast increase in derivative use, designed to mitigate systemic risk, had produced exactly the opposite effect.

[17] In a February 22, 2010 letter to The Wall Street Journal, five former Secretaries of the Treasury endorsed the Volcker Rule proposals.

[19] As of February 23, 2010, the U.S. Congress began to consider a weaker bill allowing federal regulators to restrict proprietary trading and hedge fund ownership by banks, but not prohibiting these activities altogether.

[21] Despite that vote, the proposal made it into the final legislation when the House–Senate conference committee passed a strengthened version of the rule that included the language prepared by Senators Merkley and Levin.

Senator Levin commented on the importance of that aspect: We are also pleased that the conference report includes strong language to prevent the obscene conflicts of interest revealed in the Permanent Subcommittee on Investigations hearing with Goldman Sachs.

[29] Financial firms such as Goldman Sachs, Bank of America, and JPMorgan Chase & Co. posted comments expressing concerns about the rule.

[33][34] The proposed regulations were immediately criticized by banking groups as being too costly to implement, and by reform advocates for being weak and filled with loopholes.

I'd love to see a four-page bill that bans proprietary trading and makes the board and chief executive responsible for compliance.

However, during his report to Congress on February 29, 2012, Federal Reserve Chairman Ben S. Bernanke said the central bank and other regulators would not meet that deadline.

[48][49] Wall Street lobbyists continued to ask the Federal Reserve to extend the deadline for some banking investments in private equity and hedge funds.

Specifically, banks would be allowed to acquire or retain ownership interests in venture capital funds, or pools of investment for small businesses and start-ups.

Federal Reserve Governor Lael Brainard voted against the proposal, arguing that "several of the proposed changes will weaken core protections in the Volcker rule and enable banking firms again to engage in high-risk activities related to covered funds"[11] On June 25, 2020, the Volcker Regulators relaxed part of the rules involving banks investing in venture capital and derivative trading.

[52][53] The Liikanen Report, or "Report of the European Commission's High-level Expert Group on Bank Structural Reform", is a set of recommendations published in October 2012 by a group of experts led by Erkki Liikanen, governor of the Bank of Finland and ECB council member.

The "Liikanen Group" was molded after the UK's Independent Commission on Banking and the President's Council on Jobs and Competitiveness: it was established in Brussels by EU Commissioner Michel Barnier in February 2012.

[55] On October 24, 2017, citing "no foreseeable agreement" in sight on criteria, the European Commission scrapped the draft legislation that would have permitted the EBA regulator to order "too big to fail" banks to split off their trading activities.

[56] The proposal of the Volcker Rule led to an exodus of top proprietary traders from large banks to form their own hedge funds or join existing hedge funds including Todd Edgar and Roger Jones from Barclays,[57] Sutesh Sharma from Citigroup,[58] George "Beau" Taylor and Trevor Woods from Credit Suisse, Pablo Calderini, Nelson Saiers and Boaz Weinstein from Deutsche Bank,[59] Pierre-Henri Flamand, Bob Howard,[60] Morgan Sze, Darren Wong and Mathew McClean from Goldman Sachs, Deepak Gulati and Mike Stewart from JP Morgan, Peter Muller from Morgan Stanley, and Jean Bourlet from UBS.