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FDIC Approves Volcker Rule Revamp - ABI

The Federal Deposit Insurance Corp. board voted 3-1 yesterday to give big banks more leeway to make risky short-term bets in financial markets by loosening a landmark but highly contentious regulation known as the Volcker rule, Politico reported. The FDIC and four other independent agencies have dropped their proposal to tie the rule to a strict accounting standard — a move that banks argued would have made it more burdensome by subjecting additional trades to heightened supervision. Instead, regulators will give banks the benefit of the doubt on a much wider range of trades, according to the text of the final rule. Democrats immediately slammed the Trump administration for loosening the rule, which was mandated by the 2010 Dodd-Frank Act in an effort to protect depositors' money from being used by banks to turn a quick profit on short-term price changes in stocks, bonds and other financial assets. The rewrite “will not only put the U.S. economy at risk of another devastating financial crisis, but it could potentially leave taxpayers at risk of having to once again foot the bill for unnecessary and burdensome bank bailouts,” said House Financial Services Chairwoman Maxine Waters (D-Calif.) The rewrite is an attempt to clarify the type of activity that would be exempt from the proprietary trading ban for market-making, hedging or underwriting purposes. Regulators aim to introduce a separate revamp of the covered-funds provision of the rule this fall. Comptroller of the Currency Joseph Otting yesterday signed the revised rule. Three other agencies — the Federal Reserve, Securities and Exchange Commission and Commodity Futures Trading Commission — must still approve it.

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