A 10% leverage ratio does not justify waiving the Volcker rule

Former Fed manager Christopher Laursen warns against prop trading, even for well-capitalised banks

In the US Treasury’s recently released financial regulatory reform report, several changes to the Volcker rule trading requirements are recommended. Although several of these recommendations would reasonably reduce the burden without adding significant risk to the system, particularly on smaller firms, the idea that “well-capitalised” banks could opt out of the rule altogether is a step too far.

Such an approach could too easily lead to insured banks loading up on trading risk and thereby