On Tuesday, December 10, 2013, the three federal banking agencies – the Board of Governors of the Federal Reserve System (the “Federal Reserve”), the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation – as well as the Securities & Exchange Commission (“SEC”) and the Commodity Futures Trading Commission, approved a final regulation implementing Section 619 of the Dodd-Frank Act, a statutory provision more generally known as the “Volcker Rule.” The 72-page final regulations1 with the accompanying 892-page explanatory “Preamble”2 were issued nearly three and a half years after the enactment of the Dodd-Frank Act, and more than two years following the proposed regulations issued in October 2011. In conjunction with the adoption of the final regulations, the Federal Reserve issued an order delaying the conformance date for Volcker for an additional year, until July 21, 2015.3

The Volcker Rule and last week’s implementing regulations are significant in a number of respects. The Volcker Rule and its regulations reflect a shift in U.S. regulatory policy towards foreign banks. While historically U.S. banking regulation sought to regulate only those activities of foreign banks that are conducted within offices or affiliates located in the U.S., the Volcker Rule regulates a foreign bank’s activities conducted outside the U.S. that have certain contacts with the U.S. Second, the Volcker Rule represents the first major rollback in bank and bank holding company powers in recent times, following a three-decade period of expansionary authority. The rollback in powers is particularly noteworthy because few other countries have sought to impose similar limitations on their home country banks, and as recognized by Federal Reserve Staff when the final regulations were approved, few countries are expected to adopt Volcker-like limitations in the near future. Thus, foreign banks that become subject to the Volcker Rule will find that U.S. law is more restrictive than home country law. Finally, while the regulations are highly complex, they are also highly dependent on interpretations and positions fleshed out in the supervisory process, and thus the true impact of the Volcker Rule and its regulations will not be understood for some time.