Volcker Rule Price Tag: $1 Billion

Oct 31 2011 | 9:47am ET

The Volcker rule, severely limiting banks' ability to invest in hedge funds and private equity funds, will cost those banks almost $1 billion to implement—the government thinks.

The Office of the Comptroller of the Currency said banks face about $917 million in capital costs and about $50 million in annual legal and compliance costs. The numbers are estimates, because, as the OCC admitted, it wasn't able to figure out how many of the nearly 2,100 "national banks" have an ownership stake in an alternative investment fund.

"Thus, we use banks' reporting of investments for fiduciary clients as a proxy to estimate the number of banks that may have an ownership interest," the OCC explained.

The lion's share of the estimated costs would fall on just 34 banks. More than 1,800 are expected to have only minimal compliance costs.

In addition to limiting banks' investments in hedge funds and private equity funds to just 3% of Tier 1 capital—and requiring them to deduct those investments from their Tier 1 capital—the Volcker rule also bars banks from proprietary trading.


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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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