Sens. Carl Levin, D-Mich., and Jeff Merkley, D-Ore., released formal language Monday on how they would like to strengthen the so-called Volcker Rule to ban proprietary trading by banks and restrict their investments in hedge funds and private-equity ventures.
Though the amendment would be stronger than the current Senate language on the Volcker Rule, the revision includes some exemptions.
Specifically, banks would be allowed to continue proprietary trading for buying and selling government obligations, underwriting and market-making to serve clients, risk-mitigation hedging activities, insurance activities, Small Business Administration investments and other activities not resulting in a material conflict of interest. Also, the amendment would permit banks to provide advisory services to hedge funds as long as the transactions are at arm's length and do not create taxpayer bailout risk.
In addition, regulators must adopt rules imposing higher capital standards on nonbank, systemically important companies engaged in proprietary trading and sponsoring or investing in hedge funds or private equity.