In December 2013, five U.S. financial regulatory agencies adopted final regulations to implement the Volcker Rule. As expressed in the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Volcker Rule generally prohibits banking entities from engaging in proprietary trading, but permits certain types of proprietary trading activities — including underwriting, market making and risk-mitigating hedging. The Volcker Rule also prohibits banking entities from making substantial investments in, and conducting certain other activities with respect to, private equity funds and hedge funds. The Volcker Rule represents an effort to separate the “social safety net” afforded by the Federal Reserve’s discount window (which provides short-term, low-interest loans to banking institutions to cover shortages of liquidity) from risks incurred by financial institutions through their own short-term investments.

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