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Volcker rule to have a large impact on financial compliance

Finalized version of Volcker rule creates compliance challenges

Since 2011, banks have been prepping for new financial regulations named after former Federal Reserve Chairman Paul Volcker. The proposed regulations generated thousands of comments over the past two years, and the Volcker rule was finally settled in December 2013 and will go into full effect in 2015.

What does it say, and what does it mean for the future of bank compliance programs?

On a high level, the Volcker rule forbids banks from engaging in proprietary trading and puts limits on banks’ investments in hedge and private equity funds. The rule seeks to lower the chance of high-risk activities that helped created the financial crisis of 2008. 

Companies have been prepping for Volcker for two years now, but as we get closer to 2015, it’s important that they keep a few important compliance pillars in mind.

First, businesses need to have not only a clear compliance structure, but the ability to report on their compliance activities clearly. Companies should fold the Volcker requirements into their existing compliance programs and be able to demonstrate the steps they have taken to meet all of the regulations. This involves gathering and analyzing data, as this will allow banks to show in clear black and white what they are doing to be compliant. In addition, banks need to keep a much closer eye on their compensation packages, instituting clear governance policies to ensure that they are not, for example, rewarding any prohibited trading activities.

All of the above changes will come, in part, with the implementation or strengthening of an ethical culture with clear lines of communication. Regulatory requirements come and go, and meeting and reporting on compliance is important, but those processes become much easier in an environment that values ethical behavior.


For more compliance and regulatory news, check out the following:

Compliance: Rule 506 “bad actor” disqualifications

Federal Reserve reveals new stress tests for nation’s largest banks

Surveys show regulation, compliance overwhelming

Coakley eyes governor seat, discusses triumphs and barriers

Senior Editor and Community Manager

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Rich Steeves

Richard P. Steeves is Senior Editor and Community Manager of InsideCounsel magazine, where he covers the intellectual property and compliance beats. Rich earned a B.A....

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