Adoption of the Volcker rule will result in radical changes in financial regulation

Five years after the financial crisis U.S. regulators plan to approve the «Volcker Rule» that received its name after the former head of the Federal Reserve and Obama's adviser, Paul Volcker. This rule is part of Dodd-Frank law on reforming Wall Street and consumer protection, adopted in response to the global financial crisis, The New York Times reports.

Tuesday, December 10, a meeting of representatives of five federal control and supervisory agencies (the Federal Reserve, the Commission on Securities and Exchange Commission, the Federal Deposit Insurance Corporation, the Office of Comptroller of the Currency and Commodity Futures Trading Commission). They are expected to vote for the adoption of this rule.

After the reform of the financing sphere is approved, the regulators will have more tools to influence the country's largest banks. Thus, the «Volcker rule» will prohibit investing depositors' funds in hedge funds and private equity funds, carry out simultaneously several types of operations, such as lending and customer orientation, encourage risky operations through bonus payments. It will also limit the opportunity to buy, accumulate and sell securities.

Despite many prohibitions, banks will reserve the possibility of conducting some hedging transactions. The only condition for such transactions is clear identification of risks.

Supporters of the «Volcker Rule» believe that the reform will help prevent the accumulation of risky assets and protect the economy from another financial crisis.

The main opponent of the introduction of the new regulation is Wall Street. Bank managements believe that the «Volcker rule» will interfere with conducting secure transactions, such as risk insurance. Critics of the rule argue that strict regulation of banks would damage the U.S. economy.