Volcker Rule Highlights And Initial Reactions

EXECUTIVE SUMMARY

On December 10, 2013, five financial regulatory agencies¹ adopted a final rule (the "Volcker Rule" or the "Rule") to implement the prohibitions on engaging in proprietary trading, and on owning, sponsoring or having certain relationships with hedge funds or private equity funds ("covered funds"), that apply to a "banking entity"² pursuant to the so-called "Volcker Rule" provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act.³

The Volcker Rule, named for Paul A. Volcker, a former Chairman of the Board of Governors of the Federal Reserve System and advisor to President Obama, was intended to restrict activities thought to increase the fragility of the United States ("U.S.") financial system. The Rule has far-reaching implications for both domestic and foreign banking entities. The full effects of the Rule will take time to unfold completely through supervisory application and interpretation that will shape the operations of