Important Facts For Prelims
Volcker Rule
- 10 Dec 2019
- 1 min read
Why in News
Recently, Paul Volcker, former Federal Reserve chairman who helped in tackling U.S. inflation in the 1980s and inspired Wall Street reforms in the wake of the global financial crisis, passed away.
- To help the U.S. economy in recovering from the 2008 crisis, he proposed the Volcker rule that restricted banks from making high-risk investments with depositors' cash.
- The Rule prohibits banking entities from:
- engaging in short-term proprietary trading of securities, derivatives, commodity futures and options on these instruments for their own account. Proprietary trading is when a firm invests its own money with the aim of a direct own profit
- owning, sponsoring, or having certain relationships with hedge funds or private equity funds, referred to as ‘covered funds’.
