Banks received a two-year reprieve on a major provision of the Dodd-Frank financial reform law Thursday.
The Federal Reserve announced it would delay until July 2014 the part of the rule that prevents banks from having their own hedge funds or private equity funds.
Named for former Federal Reserve Chairman Paul Volcker, the Volcker Rule prevents banks with insured deposits from trading for their own profit with customers’ money.
Banks cannot buy or start new funds, but Thursday’s announcement delays the deadline for them to dispose of the ones they had before the Volcker Rule was finalized late last year.
The delay is just the latest bump in the road for the Volcker Rule, a complex regulation that five agencies were tasked with writing. Originally slated to be finished in 2012, regulators had to push hard to wrap it up before the end of 2013.
Many banks have already closed or spun off trading desks and hedge funds since the financial crisis in anticipation of the rule.
The financial reform advocacy group Americans for Financial Reform called Thursday’s decisions “deeply disappointing” and said that it “raises serious questions about regulators’ intentions to properly enforce the Volcker Rule.” The group also noted in a statement that it “has now been four years since the passage of the Volcker Rule. The public needs and expects to see concrete progress in the implementation of the rule, not continual delays.”
The Fed said the other four agencies involved in writing the rule were consulted in the decision announced Thursday. Those are the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission and the Commodity Futures Trading Commission.
