WASHINGTON, Dec. 10 (Xinhua) -- U.S. Federal Reserve and other four financial regulators on Tuesday adopted the final version of the Volcker rule in a bid to prevent banks from making risky bets with their own money.
The Volcker rule, named after the former Federal Reserve chairman Paul Volcker, is a centerpiece of the Dodd-Frank Act, the
financial overhaul regulation enacted by President Barack Obama in July 2010, to prohibit banking entities from engaging in high-risk activities known as proprietary trading.
"As part of this Wall Street reform, we fought to include the Volcker Rule -- a rule that makes sure big banks can't make risky bets with their customer's deposits," said Obama in a statement after the approval.
In a statement following Tuesday's approval, U.S. Treasury Chief Jacob Lew also said: "The Volcker rule will change behavior and practices in our financial markets to safeguard taxpayers from risks created by banks' proprietary trading and investments in hedge funds and private equity funds."
After struggling for more than two years to draft the complex rule, the five federal agencies -- the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC), the Office of the Comptroller of the Currency (OCC), the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission ( CFTC) -- signed off the reform document that contains new versions aimed at narrowing carve-outs for legitimate trades.
Obama thanked Secretary Lew and the regulators for their hard work to "finalize the rule" and called on Congress to give them " adequate funding" to implement the rule effectively and efficiently.
"The final rule is the product of close and extensive collaboration among the agencies over the two years since the rule proposal was first issued in October 2011," said SEC Chair Mary Jo White in a statement. "It is very important that the agencies charged the implementation of the Volcker Rule are acting together in adopting a single rule under the Bank Holding Company Act that can be consistently applied and implemented based on continuing consultation among the agencies."
The final rule provides exemptions for certain activities including market marking and risk-mitigating hedging, but imposes limits on banking entities' investment in hedge funds and private equity funds, the Federal Reserve said in a statement.
Banking entities will be required to fully conform their activities and investments to the Volcker rule by July 21, 2015, said the Fed.
"With today's approval of the Volcker rule, regulators have taken a critical step toward completing implementation of the Dodd- Frank Wall Street Reform and Consumer Protection Act," said U.S. Treasury Chief Jacob Lew.