Volcker Rule
The Volcker Rule bars US banks that take insured deposits from most trading for their own profit, and limits their stakes in hedge funds and private equity.
🌍 In the real world
Named after former Fed chair Paul Volcker, it was part of the Dodd-Frank Act of 2010 and took full effect in 2015.
The idea is that a bank backed by deposit insurance shouldn't gamble with that safety net. Banks can still trade for customers and to hedge their own risks.
🎮 In Journey Shares
The game's bank never buys stocks with depositors' money. It keeps spare cash at the Fed, as the Volcker Rule and capital rules push real banks to do. →
🧭 How to use it
Your savings are exposed to the bank's loans, not to bets on the market. What can sink the game's bank is borrowers' margin losses, so watch its capital when prices fall.
🎮 Learn Volcker Rule the fun way
Try it in a live 3D city with play money: trade shares in real public figures, get margin-called, pay your taxes and rob a bot or two. Free, and nothing real is at stake.
❓ Common questions
Why was the Volcker Rule controversial?
Banks argued it was hard to tell banned trading apart from permitted market-making and hedging, and the rules ran to hundreds of pages.
Was it loosened later?
Regulators simplified it in 2019 and 2020, especially for smaller banks.
📜 Where it came from
🔗 Related terms
- Capital requirements: Capital requirements are rules that make banks fund part of their lending with their own money (equity) so they can absorb losses without failing.
- Moral hazard: Moral hazard is the tendency to take more risk when someone else bears the cost if things go wrong, such as a bank expecting a bailout or a driver who is fully insured.
- Deposit insurance: Deposit insurance guarantees that savers get their money back, up to a limit, if their bank fails.
- Bailout: A bailout is when a government or central bank gives money to a failing company or bank to keep it from collapsing, usually because its failure would hurt the wider economy.
Categories: Banking and credit
Practise with $10,000 in play money
Free. No real money involved.