The Volcker Rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, restricts U.S. banks from engaging in certain speculative investments and proprietary trading activities that do not benefit customers. It aims to reduce systemic risks in the financial system.

• Prohibition of Proprietary Trading: Banks are prohibited from trading securities, derivatives, or other financial instruments for their own profit.
• Hedge Fund and Private Equity Investments: Limits banks' ownership interests in, and relationships with, hedge funds and private equity funds.
• Compliance Programs: Requires banks to implement robust compliance programs to monitor and enforce adherence to the rule.
• Reporting Requirements: Banks must provide periodic reports to regulators on trading activities and fund investments.

Enacted in 2010 under the Dodd-Frank Act, with phased implementation starting in 2013. Revisions in 2020 aimed to simplify compliance requirements for smaller institutions.

• Financial Penalties: Significant fines for violations of the rule.
• Operational Restrictions: Enhanced regulatory oversight and limitations on trading activities.
• Reputational Damage: Non-compliance may harm the institution’s credibility and stakeholder trust.

• Systemic Stability: Reduces risks associated with speculative trading and conflicts of interest.
• Regulatory Trust: Demonstrates adherence to key regulatory safeguards.
• Market Integrity: Enhances public and investor confidence in the banking sector.