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Fed Board announces Volcker Rule compliance period clarification

Bob Corker

The Federal Reserve Board announced on Thursday that U.S. financial institutions will have until July 21, 2014, to comply with the Volcker Rule but said that the compliance period could be extended if necessary.

The Volcker Rule, a provision of the 2010 Dodd-Frank Act, prohibits banks from engaging in proprietary trading—or risky trading with client funds. The announcement is a relief for many financial institutions that worried that compliance would be necessary beginning this summer, according to the Chicago Tribune.

The clarification “is critically important because it alleviates concerns over potentially having to comply with a rule whose details had not yet been made clear,” lobbying group Securities Industry and Financial Markets Association said, the Chicago Tribune reports.

In October, regulators presented a 300 page proposal of the Volcker Rule, but Chairman Ben Bernanke of the Federal Reserve announced in March that regulators would likely be unable to finalize the rule before its July 21 deadline.

Critics of the rule claim that it is overly broad, complex and would damage market liquidity. Senator Bob Corker (R-Tenn.) said that the announcement alone is proof that the rule is much too complex.

“While I am pleased that the regulators have recognized the need for this modest step, this flawed rule will need to be fixed by Congress so companies across our country will not have to incur higher costs of doing business,” Corker said, according to the Chicago Tribune.

The rule is likely to most affect large institutions like Morgan Stanley and Goldman Sachs that saw substantial profits as a result of proprietary trading.

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