WASHINGTON (Reuters) – U.S. regulators have circulated a new draft of the “Volcker Rule” that would further ease its requirements and scrap a proposed new test that had been met with fierce resistance from Wall Street, according to two people with knowledge of the matter.
FILE PHOTO: The Federal Reserve Board building on Constitution Avenue is pictured in Washington, U.S., March 27, 2019. REUTERS/Brendan McDermid
The changes will be a relief for Wall Street, which had worried the proposed changes would actually create more headaches for the industry.
Regulators are aiming to vote in coming weeks on the revamped version of the rule, which was introduced following the 2007-2009 global financial crisis to bar banks that accept taxpayer-insured deposits from engaging in short-term speculative trading.
In May 2018, U.S. regulators unveiled a plan to modify the rule, aiming to make compliance easier for firms such as Goldman Sachs Group Inc, JPMorgan Chase & Co and Morgan Stanley, which have long complained the rule is too complex and subjective.
That first rewrite proposed a new test for assessing whether trades are speculative that would focus on the accounting treatment of the instruments traded, replacing a more subjective test that aims to identify if a trader intended a trade to be speculative. Banks detested the original “intent” test, saying it was unworkable and unfair.
But the industry was equally unhappy with the proposed accounting test, warning it could end up ensnaring a host of other assets that were never meant to be covered by the rule.
The regulators, led by the Federal Reserve,