Key points from the final Volcker rule revisions

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As of October 8, the five regulatory agencies charged with overseeing the Volcker rule have approved final changes to align compliance requirements to volumes of trading activity, modify key definitions around proprietary trading and simplify metrics reporting. Notably, the updated rule, or Volcker 2.0 as it is sometimes called, transitions away from requiring extensive reporting and documentation for banks to prove that they are not engaging in prohibited trading. This is a win for the banks that have long felt that a “presumption of guilt” when it comes to proprietary trading is no longer warranted as they have already restructured their core businesses to adhere to the original rule’s requirements as well as the fact that other post-crisis capital and liquidity requirements make “proprietary-like” trading unattractive.

The revisions also address many other long-standing industry concerns, but some changes are “too little too late” as banks have already spent significant time and resources to meet the original rule’s requirements. Nonetheless, banks will welcome the shift toward presumed compliance as they will be able to cut costs and redirect resources to more value-added activities.

  1. Less trading activity, fewer requirements
  2. More flexibility for FBOs
  3. Accounting-based test, we hardly knew you
  4. Modified metrics and more time to report
  5. “RENTD” revisions
  6. Hedging burden reduced
  7. More to come on covered funds

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A publication of PwC's financial services regulatory practice


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Julien Courbe

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