Regulators adopt final Volcker rule limits on bank trading Government regulators ushered in a new era of oversight Tuesday aimed at reining in Wall Street risk-taking, voting to prevent big banks from trading for their own benefit. The "Volcker rule," named after former Federal Reserve chairman Paul Volcker, also bars banks from owning hedge funds and private-equity funds. The centerpiece of the 2010 Dodd-Frank financial overhaul law took three years to complete as government infighting and intense lobbying by banks slowed the process. "Our financial system will be safer and the American people are more secure because we fought to include this protection in the law," President Obama said in a statement. Lawmakers devised the measure to prevent banks with government backstops such as deposit insurance from making risky trades for their own benefit, arguing that the bets could endanger taxpayers. The challenge for regulators has been restricting such proprietary trading without impeding acceptable practices, such as firms trading on behalf of clients as market-makers or hedging their risk against fluctuations in interest rates. But banking industry officials continued to warn that the rule goes too far. "Many bankers will struggle to understand complex provisions that have no application to their business model and are open to conflicting interpretations," Frank Keating, president of the American Bankers Association, said in a statement. On Tuesday, the Federal Deposit Insurance Corp. board and the Federal Reserve unanimously approved the final version of the rule. The Securities and Exchange Commission voted 3 to 2 in favor, while the Commodity Futures Trading Commission adopted it in a 3 to 1 vote. Supervision will ultimately be the responsibility of the Office of the Comptroller of the Currency, the CFTC and the SEC. "Issuing a final rule is only the beginning of the process," Comptroller of the Currency Thomas J. Curry said at the FDIC board meeting. The OCC will be especially vigilant in developing a robust examination and enforcement program that ensures our largest institutions will remain compliant. The 71-page rule, a streamlined version of the 298-page draft, addresses many concerns about which activities and investments are allowed, but gives regulators flexibility to interpret the rules. Institutions are allowed to take positions to help clients trade, but their inventories cannot exceed "the reasonably expected near-term demands of customers," according to the rule. There are a host of requirements for banks to prove they are not engaging in speculative gambling but acting to serve client needs or protect against market risks. The rule also lifts the ban included in the original draft on proprietary trading in foreign government debt. A key part of the rule calls for firms to provide a rationale of their hedging strategy to prevent another "London Whale," the $6.2 billion trading fiasco at JPMorgan Chase. The 2012 blunder turned the tide of the debate as supporters of change gained the upper hand in calling for tough restrictions on risky hedges.