Fed Approves Volcker Rule

Feb 10 2011 | 4:56am ET

The Volcker rule, barring banks from proprietary trading and seriously limiting their freedom to invest in hedge funds, will become a reality on April 1.

The Federal Reserve yesterday approved the rule, mandated by the Dodd-Frank financial regulation reform law last year. The central bank gave the banks it oversees two years to do what it takes to come into compliance with the rule; the Fed can grant more time if it sees fit in certain cases.

Under the rule, banks will have to do away with their proprietary trading operations. Their ability to invest in or sponsor hedge funds is also strictly limited; the Dodd-Frank law allows them to have only 3% of their capital tied up in such funds.

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