A US rule that restricts banks from proprietary trading and from owning certain funds. Market making and hedging are allowed.
Where you will meet it
Volcker Rule comes up in 5 learning outcome notes across the FRM syllabus.
A few of them:
The Governance of Risk Management FRM Part I · Foundations of risk management
“Dodd-Frank (2010) created the Financial Stability Oversight Council, the Volcker Rule limiting proprietary trading, stress tests, resolution plans (living wills) and board risk committees.”
The Failure Mechanics of Dealer Banks FRM Part II · Liquidity and treasury risk measurement and management
“Structural measures include the Volcker rule limiting proprietary trading, central clearing and margin for standardised OTC derivatives, resolution plans, and temporary stays on termination rights.”
Case Study: Investor Protection and Compliance Risks in Investment Activities FRM Part II · Operational risk and resilience
“Dodd-Frank (US, 2010) created the Consumer Financial Protection Bureau and the Volcker Rule.”
Risk, Regulation and Organizational Structure FRM Part II · Risk management and investment management
“It includes capital charges and exposure limits on banks, margin and clearing requirements for derivatives, and the Volcker rule, which restricts banks from sponsoring or investing in hedge funds.”
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