Federal Regulators Just Relaxed the Volcker Rule. Here's Why it's Good For Banks
Federal banking regulators are relaxing provisions within the Volcker Rule, a key part of the Dodd-Frank Act, which regulated banks much more heavily following the role the industry played in sparking the Great Recession.
The Volcker Rule prevents banks from participating in proprietary trading -- that is, investing their own funds instead of client assets in stocks, derivatives, options, or other financial instruments. The Volcker Rule also generally prohibits banks from taking an ownership stake in a covered fund, such as a hedge fund or private equity firm. Banks with under $10 billion in assets were excluded from the Volcker Rule last year, so this week's news was a big win for large bank stocks, which surged following the news (although the gains would prove short-lived when the Federal Reserve released results of its latest bank stress test).
The new Volcker Rule will go into effect Oct. 1, according to the U.S. Office of the Comptroller of the Currency. Let's take a deeper look at the changes and why this helps bank stocks.
Source Fool.com
