Vague Volcker causes confusion

From its treatment of portfolio hedges to correlation tests and inventory limits, the Volcker rule lacks detail on key elements, lawyers say. That is an attempt to give the industry – and supervisors – some flexibility, but it could make compliance a game of chance. Peter Madigan reports

Banks will not be allowed to engage in portfolio hedging under the terms of the Volcker rule, agreed on December 10 by five US regulators – but they will be allowed to hedge risks on a portfolio basis. That awkward distinction makes the final rule tougher than the version proposed in October 2011, regulators have claimed, but lawyers are dismayed at the lack of detail added to the statute after three years of work and 18,000 comment letters – the final rule adds just four words on the topic