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Quarter-End Insights

Our Outlook for Financial Services

The Volcker Rule is finalized, so now banks need to worry about complying with it.

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  • The Volcker Rule is important. Financial institutions have spent and will continue to spend substantial amounts of time ensuring compliance with the Volcker Rule over the next few years.
  • Volcker’s key provisions include guidelines on proprietary trading and market making. The changes around proprietary trading and hedging should effectively curtail a repeat of the "London Whale" saga, while preserving market making as an important Wall Street liquidity and profit source.
  • The most important measures of success: enforcement. Regulators have obviously missed major blowups in the past as the events from 2008 and 2009 show as well as the London Whale fiasco. How the Volcker Rule is enforced by the multiple agencies in charge will determine its success.

 

Stephen Ellis does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.