Definition of Volcker rule

This proposal, announced by US President Barack Obama, aims to limit risky behaviour within banks but is narrower than the Glass-Steagall Act. Banks that take retail deposits would not be allowed to engage in proprietary trading that is not directly related to the market making and trading they do for customers. These banks would also be prohibited from owning or sponsoring hedge funds or private equity funds.

Mr Obama also wants to cap the overall size of banks.

This rule was inspired by Paul Volcker, the former chairman of the Federal Reserve. [1]

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