BANK STRATEGY AND RISK

Bank Strategy and Risk

[Name of the Institute]Bank Strategy and Risk

Ans:1 (a) Main Features of Volcker Rule

Prohibited Activities Mentioned in the Volcker Rule

In the year 2010 on the 21st of July, The Reform of Dodd-Frank Wall Street, along with the Act on Consumer Protection enacted. This reform and act consist of § 619 section, which is stated as the Volcker Rule (www.gibsondunn.com). As per the Volcker Rule it clearly prohibits all the banking entities, as well as banks affiliates, from the following:

Funding, or capitalising in, a prevaricate fund, any nature of private funding in equity, and possibly abundant, other nature of privately accessible funding and mutual investment automobiles. This includes all the nature of scheme capital funding, funds for the real estate, planned finance automobiles, as well as some nature of distinctive purpose automobiles utilised in project funding dealings, apart from funds which are prearranged or offered via the entity, depending on:

No more or less than 3% of the funds ought to be owned via the banking entity.

There is an overall limit provision of only 3% of Tier 1 of the banking entity's funds capitalized in private funding.

However, there are a number of other limitations, together with the term denoted to the fund, along with the allied dealings.

Along with this, the banking individual might create seed capitalizing in any fund, as well as possessing 100 percent of fund, for over a period of one year; or even:

The banking entity is engaging in registered trading, which is commonly defined as involving in short tenure business, which is subject to several exemptions, which permits the banking entity substantial flexibility to involve in the short term business dealings, including business in:

It includes doing trading in United States government, municipal, along with the state compulsions.

The trade ought to be in link with guaranteeing or market creating related happenings.

Furthermore the trade should be in linkage with assured risk alleviating hedging activities.

Lastly it should be in any form of security or even instrument in the best interests of clients or customers (mm.jpmorgan.com).

Effective Date

All the banking entities ought to comply with the act by the ending of the effective date of Volcker Rule's, along with the transition tenure.

The eventual date of compliance is no less than 3 years, though it is more probable to stand 4 years, from the bill's enactment date of July 21, 2010; there is the possibility that the Board of Governors of the Federal Reserve will issue up to three 1-year extensions.

Along with this, any banking entity has the possibility that they can apply an added extension of 5 years, which is moreover, towards the three (3) and four (4) year tenure referenced earlier. However, in case the banking individual is in an endowment which clearly adhere to the description of illiquid reserve, as well as the entity is indebted contractually towards the reserve since the 1st of May in the year 2010.

Ans: 1 (b) Critical assessment of Volcker Rule

Additional Restrictions

Other restrictions include that any nature of banking entity, which benefactors a private fund, any nature of banking entity, which acts exclusively as a venture consultant towards a private ...