Volcker Rule

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Dictionary Says

Definition of 'Volcker Rule'

Trading restrictions placed on financial institutions. The Volcker rule separates investment banking, private equity and proprietary trading (hedge fund) sections of financial institutions from their consumer lending arms. Banks are not allowed to simultaneously enter into an advisory and creditor role with clients, such as with private equity firms. The Volcker rule aims to minimize conflicts of interest between banks and their clients through separating the various types of business practices financial institutions engage in.
Investopedia Says

Investopedia explains 'Volcker Rule'

Named after former Federal Reserve Chairman Paul Volcker, the Volcker rule basically stops banks from doing their normal business (installment loans, residential mortgages, equity credit loans, deposit services) as well as trading on their own behalf. The rule was introduced following the recession of 2008, to control the risk associated with the financial sector. Wall Street banks were accused of accumulating an excessive amount of risk and unfair business practices due to the inability of regulators to properly monitor their complex instruments and activities. The Volcker rule aims to protect individuals by creating a more transparent financial framework which can be regulated with greater ease.

For more on the Volcker Rule, read How The Volcker Rule Affects You.

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