Volcker rule would avoid another London Whale - Fed Governor

Beached Whale

Federal Reserve Governor Daniel Tarullo said regulators are writing a final version of the Volcker rule to block any repeats of JPMorgan’s $6.2bn in losses last year from derivative bets by a trader dubbed the London Whale.

'One of the key mandates to the staff from all the five agencies working on the final rule has been to ensure that London Whale, in substantive and procedural terms, couldn’t happen again', Tarullo said last week in response to audience questions after a speech in Washington. He called the JPMorgan losses 'a real-world case' that allows them to backtest the Volcker rule, which bans proprietary trading at banks.

Bloomberg reports that Tarullo, 60, is the Fed governor in charge of bank supervision and regulation and is overseeing the central bank’s implementation of the Dodd-Frank financial regulation overhaul  - including Volcker. He said the proposed version would’ve prevented the losses by JPMorgan trader Bruno Iksil because it requires banks to show how trades work as hedges instead of as proprietary trades.

The Fed and four other U.S. financial regulatory agencies are working to finish a final version of the rule before the end of this year.

To access the complete Bloomberg article hit the link below:

Fed's Tarullo Says Volcker Rule Will Prevent More London Whales

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