Key points from the proposal to reform the Volcker rule

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On June 5th, five regulatory agencies released for comment a long-awaited proposal to simplify the Volcker rule, which has often been considered overly complex by both banks and regulators. The proposed changes are expected to provide much needed clarity and reduce the rule’s compliance burden. In particular, the proposal would align compliance requirements to volumes of trading activity, modify key definitions around proprietary trading, and adjust requirements for exemptions. Notably, several proposed changes would presume compliance rather than subjecting banks to extensive reporting, documentation, and other requirements in order to prove that they are not engaging in prohibited trading. 

Despite the potential for simplified compliance requirements, it is highly unlikely that banks would return to pre-crisis proprietary trading as they have already restructured their core businesses to adhere to the requirements of the rule, and other post-crisis capital and liquidity requirements make proprietary trading unattractive. Nonetheless, banks will welcome the shift toward presumed compliance and reliance on their existing risk management practices as they will be able to cut costs and redirect resources to more value-added activities.

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A publication of PwC's financial services regulatory practice

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Julien Courbe

Financial Services Leader, PwC US

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