Regulatory agencies just approved the Volcker Rule. The rule makes it harder for banks to take on excessive risk. Beyond that, it gets really confusing. Here’s why…..
It’s over 100 pages, closer to 1000 when you include attachments A - Zzzzzzzz. Seriously, who’s going to read all that?
But don’t worry. Banks have until July 2015, an extra year, to figure out what’s in the new rule and then comply. But still, what does this all mean?
Ok. And once the banks figure it out, their internal compliance departments must “self-regulate” their firm? If this is like the honor system at the soda fountain at McDonalds, I’m in.
Ugh. So confusing. It’s ok though, I guess banks shouldn’t freak out yet. Some “hedges” on positions are still ok. Which ones? No idea, and neither do the people who wrote the rule.
In the end Volker says don’t worry be happy. You’ll be able to tell the difference between a true portfolio hedge (good) and excessive risk taking (bad). He says it’s simple, excessive risk taking “is like pornography.” “You know it when you see it.”
Ok, seriously (kind of). Missed why everyone is talking about the Volcker Rule, here’s a quick explainer.