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Volcker Rule

  • 10 Dec 2019
  • 1 min read

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Recently, Paul Volcker, former Federal Reserve chairman who helped in tackling U.S. inflation in the 1980s and inspired Wall Street reforms in the wake of the global financial crisis, passed away.

  • To help the U.S. economy in recovering from the 2008 crisis, he proposed the Volcker rule that restricted banks from making high-risk investments with depositors' cash.
  • The Rule prohibits banking entities from:
    • engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account. Proprietary trading is when a firm invests its own money with the aim of a direct own profit 
    • owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as ‘covered funds’.

Source: BS

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