U.S. regulators Tuesday voted to adopt the so-called Volcker rule meant to limit the ability of banks to use their own money to make risky investment bets.
The Federal Deposit Insurance Corp. and the U.S. Federal Reserve Board voted unanimously to approve the rule that was a component of the Dodd-Frank financial overhaul law, a massive regulatory revision that came about as a reaction to the 2008 financial crisis that triggered the worse recession since the Great Depression.
The Wall Street Journal reported that Comptroller of the Currency Thomas Curry approved of the 1,000-page rule for which he was given two votes, one as the comptroller of the currency and one as a board member of the FDIC.
"During 2014, we will develop the necessary examination procedures and training to ensure that our bank examiners have the tools they need" to police the new policies, Curry said in a statement.
Commodity Futures Trading Commissioner Bart Chilton said he supported the rule once it became tough enough. The final document was "solidified tightly to avoid loopholes," Chilton said.
The core intention of the Volcker rule is to prevent banks from making market bets with federally insured money, such as depositor money that is insured by the FDIC.
As such, economics Professor Peter Morici at the University of Maryland said the rule would serve the country well if it forces banks to put their efforts into making loans that will bring returns to the bank, rather than making risky loans and then insuring those loans with derivatives, which, during the financial crisis, compounded the problems and magnified the losses.
Fed Chairman Ben Bernanke said banks would have until mid-2015 to comply with the new rule but many large banks have already made adjustments, the Journal reported. As such, stocks for many financial firms were higher on Wall Street Tuesday.
Bank of America Chief Executive Officer Brian Moynihan said at an investor meeting in New York Tuesday BofA had already made most of the changes needed to comply.
"That's not a big part our company," he said.
"We'll have to work through it, but in the end if we serve our customers, there's a business there," he said.
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Original headline: Regulators adopt Volcker rule
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