Banks could circumvent Volcker rule by gaining hedge fund exposure synthetically
Despite limiting investment in hedge funds, the Volcker rule contains no restriction on banks taking synthetic exposure to certain firms or strategies - a possible loophole that could allow banks to invest in structured products linked to the performance of hedge funds and still comply with the rules.
US president Barack Obama announced the Volcker rule on January 21, which is named after former Federal Reserve chairman Paul Volcker, who first mooted the idea in a Group of 30 report a year
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