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CFTC Chairman on the Volcker Rule: ‘It was very hard to make sense of’

Scott Gamm

The Volcker Rule, a part of the landmark Dodd-Frank financial reform bill, which prohibited banks from engaging in proprietary trading, is hard to make sense of, according to the Chairman of the Commodity Futures Trading Commission (CFTC), Heath Tarbert.

The CFTC, along with the Federal Reserve, the Office of the Comptroller of Currency, the Federal Deposit Insurance Corporation and Securities and Exchange Commission, greenlighted revisions to the rule earlier this week.

“I’ve lived with the Volcker Rule for a decade now. I was the original staffer on the Senate Banking Committee at the time,” Tarbert said at Yahoo Finance’s All Market Summit Thursday in New York City, adding that the Volcker Rule is well intentioned.

“When you looked at the Volcker Rule, there were about a thousand pages of regulations that I went through,” he said. “It was very difficult to make any sense out of it.”

NEW YORK, NEW YORK - OCTOBER 10: Moderator Scott Gamm (L) and Under Secretary of the Treasury for International Affairs Heath Tarbert attend the Yahoo Finance All Markets Summit at Union West Events on October 10, 2019 in New York City. (Photo by Jim Spellman/Getty Images)

Tarbert said the Volcker Rule was intended to apply to a small number of banks that were engaging in proprietary trading, but it “effectively applied to regional and community banks.”

“We fixed it,” Tarbert said, referring to the streamlined revisions to the regulation. Proprietary trading is the notion of a bank using customer deposits for risky trading activity.

In a press release, the Federal Reserve said the following about the updates, which take effect in 2020.

“Under the revised rule, firms that do not have significant trading activities will have simplified and streamlined compliance requirements, while firms with significant trading activity will have more stringent compliance requirement.”

Watch the complete interview here:

Scott Gamm is a reporter at Yahoo Finance. Follow him on Twitter @ScottGamm.

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