Federal Agencies Issue Final Rules Implementing the Volcker Rule

Dec 10, 2013


Today, December 10, 2013, five federal agencies issued final Rules developed jointly to implement section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, also known as the “Volcker Rule.”

The final Rules prohibit insured depository institutions and companies affiliated with insured depository institutions (“banking entities”) from engaging in short-term proprietary trading of certain securities, derivatives, commodity futures and options on these instruments, for their own account.  The final Rules also impose limits on banking entities’ investments in, and other relationships with, hedge funds or private equity funds.

Like the Dodd-Frank Act, the final Rules provide exemptions for certain activities, including market making, underwriting, hedging, trading in government obligations, insurance company activities, and organizing and offering hedge funds or private equity funds.  They also clarify that certain activities are not prohibited, including acting as an agent, broker or custodian.

Compliance requirements under the final Rules vary based on the size of the banking entity and the scope of activities conducted.  Banking entities with significant trading operations will be required to establish a detailed compliance program and their CEOs will be required to attest that the program is reasonably designed to achieve compliance.  Independent testing and analysis of an institution’s compliance program will also be required.

The final Rules are intended to reduce the regulatory burden on smaller, less-complex institutions by limiting their compliance and reporting requirements. Additionally, a banking entity that does not engage in covered trading activities will not need to establish a compliance program.

The Federal Reserve Board also announced today that banking organizations covered by section 619 will be required to fully conform their activities and investments by July 21, 2015.

Click on the hyperlinks below to access each document.

Statement by Chairman Ben S. Bernanke

Statement by Governor Daniel K. Tarullo

Final Rule (PDF)

Final Rule – Preamble (7.2 MB PDF)

Fact Sheet (PDF)

Community Bank Guide (PDF)