A Goldman Sachs sign is seen at the company's post on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Federal Deposit Insurance Corp. voted Tuesday to approve a five-agency post-crisis review of the regulation, known as the Volcker Rule.
The approval helps to clarify how banks can trade securities with their own funds where the ban was a key part of the banking outbreak after the financial crisis.
A key issue addressed by the proposed chargeback was the definition of "proprietary trading", a transaction conducted by a firm designed for direct market gain rather than investing on behalf of clients. Regulators hope to clarify the definition of proprietary trading and edit the ban that prohibits banks from making short-term equity investments.
Other institutions, including the Federal Reserve and the Securities and Exchange Commission, still need to weigh in on the proposed rebuild.
"One of the post-crisis reforms that has been the most challenging for regulators and industry is the Volcker Rule, which restricts banks from engaging in proprietary trading and owning hedge funds and private equity funds," said Jelena McWilliams, chairman of the FDIC.
"In fact, the rule has turned out to be so complex that it required 21
In particular, the final rule will remove an "accounting material" used to determine the types of prohibited trade. Instead, regulators will defer models that are easier to digest within the original Volcker rule. Although the volume of blocked trading is not expected to change significantly, banks will receive better guidance on their ability to create markets for customers.
The Volcker Rule was originally proposed by the Regulations and passed under Dodd-Frank Wall Street Reform and Protection Act and prevented banks from investing their own money in hedge funds and private equity funds.