A broad new government rule to limit risk-taking by Wall Street will force banks to rethink virtually every aspect of their trading activities, setting the stage for more tumult at the largest U.S. financial institutions, the Wall Street Journal reported today. The Volcker rule, approved by five financial regulatory agencies yesterday, could lop as much as $10 billion total in yearly pretax profit from the eight largest U.S. banks through lower revenue and higher compliance costs, according to estimates from Standard & Poor's. The 953-page edict, part of the 2010 Dodd-Frank financial overhaul, codifies and restricts the way banks trade securities. It curbs banks' ability to bet with their own capital and forces them to draw bright lines separating trades for clients from trades to limit their risks and so-called proprietary bets. Few bankers spoke openly about the rule, which goes into effect on April 1, or its possible impact.
