The Act contains a diluted version of the original Volcker proposal, which will restrict banks’ proprietary trading 1 , impose additional capital requirements on shadow banks engaged in proprietary trading, and restrict banks’ ownership stakes in hedge funds and private equity funds.
Banks are allowed to own or sponsor hedge funds and private equity funds and even to invest in them as long as their holdings didn’t account for more than 3 percent of the bank’s capital or 3 percent of the fund’s capital. 28. There have been concerted attempts at addressing the adverse incentives available to senior, secured creditors of banks.