The Volcker rule restricts excessive risk taking by commercial banks by:
A) prohibiting banks from making certain kinds of speculative investments.
B) increasing the amount of capital banks must hold.
C) decreasing the deposit insurance coverage of depositors in commercial banks.
D) limiting the compensation that bank executives can be paid.

Question

Quizplus · Accepted Answer

The Volcker Rule, part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, specifically prohibits banks from engaging in proprietary trading and from owning or investing in hedge funds or private equity funds, which are considered speculative investments. This is aimed at reducing the risk of financial institutions engaging in excessively risky activities that could threaten the overall financial system.

The Volcker Rule Restricts Excessive Risk Taking by Commercial Banks