More than a year after Congress banned certain trading activities at banks in the Dodd-Frank Act, regulators will meet publicly Tuesday to discuss implementing the ban.
The Federal Deposit Insurance Corp.'s board of directors will consider at its 10 a.m. meeting a proposal on prohibitions and restrictions on banks' proprietary trading activities. The new restrictions — first proposed by former Federal Reserve Board Chairman Paul Volcker — are also aimed at clamping down on banks' interests in hedge funds and private equity.
Under Dodd-Frank, the so-called "Volcker Rule" is implemented jointly by the FDIC, the Federal Reserve Board, the Office of the Comptroller of the Currency, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
The law bans U.S. banks and banks holding companies — as well as foreign banks with operations here — from proprietary trading as well as investment or sponsorship in hedge funds and private equity groups. Yet Dodd-Frank allows certain exceptions which are permitted under a restricted basis, including transactions done for customers and hedging activities meant to limit risk. Certain "de minimis" interests in investment funds are also allowed.
The FDIC board is also expected to provide its latest update on the status of the Deposit Insurance Fund.