Wall Street watchdogs are poised to take a major step toward overhauling Volcker Rule limits on banks’ ability to trade with their own funds, moving to ease post-crisis safeguards contested by the industry, Bloomberg News reported. Regulators responsible for the Dodd-Frank Act rule could complete work as soon as next week on revisions that include loosening restrictions on banks investing their own money in private equity and hedge funds. The group of five agencies led by the Federal Reserve has focused on a new definition of proprietary trading — which is specifically banned by Dodd-Frank. They’ve chosen to implement the changes without re-proposing the rule and seeking comment, according to three of the people, a step that could open the process to legal challenges. The final definition would remove an “accounting prong” that was floated last year as a new way for determining which types of trading would be permitted. Regulators agreed to scrap the concept after it drew sharp criticism from bank lobbyists. They will instead lean on easier-to-digest models.
