The Volcker rule is a section of the Dodd–Frank Wall Street Reform and Consumer Protection Act that restricts U.S. banks from making speculative, high-risk investments that do not benefit customers. The rule was initiated by former Federal Reserve Chairman Paul Volcker in response to the financial crisis in the latter part of the past decade.
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The Volcker rule applies to federally insured, deposit-taking banks, institutions owning such banks, and credit unions. Under the Volcker Rule, banks would be required to set up internal compliance programs subject to supervisory oversight by regulatory agencies. The compliance programs would include a minimum of six elements:
- Internal policies, procedures and infrastructure designed "to document, describe and monitor the covered trading activities and covered fund activities and investments of the banking entity to ensure" compliance.
- Internal controls designed to monitor and identify potential areas of noncompliance.
- A management framework that designates who is responsible for compliance.
- Independent testing of the program.
- Training for appropriate personnel.
- Records information management that demonstrates compliance and the ability to turn over information to a requesting agency.
Responsibility for implementing the Volcker rule is shared by the Office of the Comptroller of the Currency at the U.S. Department of the Treasury, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the U.S. Securities and Exchange Commission.
The Volcker rule provisions were originally scheduled to be implemented as a part of the Dodd-Frank Act on July 21, 2012. On April 19, 2012, however, the Federal Reserve extended the deadline two years, to July 21, 2014.