Bank stocks pull back higher as regulators ease Volcker rule, JPMorgan Chase rises 2%

US banking regulators USA They are about to ease the restrictions created after the financial crisis, a fact that triggered a surge in bank stocks on Thursday.

Officials with the Federal Deposit Insurance Commission said in a call that they are loosening the restrictions of the so-called Volcker Rule, allowing banks to more easily make large investments in venture capital and similar funds. Companies may also avoid reserving cash for derivative operations between different units of the same company, which could free billions of dollars in capital for the industry.

Shares of large banks, including JPMorgan and Morgan Stanley, were trading more than 2% after the announcement, reversing declines in pre-market trading.

The move is in line with the Trump administration’s broad push to reverse regulations set by previous leaders. While the banking industry has recognized the benefits of having to hold more capital to cushion losses, lobbyists and individuals, including JPMorgan Chase CEO Jamie Dimon, have criticized parts of the post-financial crisis regulatory regime for being too much restrictive or redundant.

The Volcker Rule, part of the 2010 Dodd-Frank Act designed to prevent another financial crisis caused in part by irresponsible risk-taking in banks, was designed to prevent banks from acting as hedge funds. The general principle is that they are allowed to facilitate transactions for clients, but they are not allowed to limit the risk of large private bets.


The FDIC and the Office of the Comptroller of the Currency will vote on the rule changes, and the Federal Reserve must also sign, according to Bloomberg, which reported on the measure.

—With reports from CNBC’s Wilfred Frost.

This is a developing story. Check back for updates.

Subscribe to CNBC PRO for exclusive insights and analysis, and live business day scheduling from around the world.