Banking Practice Exam 2025 – 400 Free Practice Questions to Pass the Exam

The primary purpose of the Volcker Rule is to limit proprietary trading by banks. This regulatory measure was established as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act in response to the 2008 financial crisis. The goal of the Volcker Rule is to prevent banks from engaging in trading activities that do not benefit their customers or serve their core business functions. By restricting proprietary trading, which involves banks using their own capital to earn profits from short-term market moves, the rule aims to reduce systemic risk and protect consumer deposits from being used for high-risk speculative bets.

This is crucial in maintaining financial stability, as proprietary trading can potentially lead to conflicts of interest and excessive risk-taking, which contributed to the financial collapse. The focus of the rule is to ensure that banks prioritize their role in providing financial services to the public rather than acting as profit-driven traders on their own accounts, thus promoting a safer and more stable banking environment. Other options mentioned, such as encouraging trading or regulating hedge funds, do not align with the main objectives of the Volcker Rule, which is specifically aimed at curtailing the risks associated with proprietary trading. Preventing bank mergers, while a concern in the banking sector, is not a direct purpose of the Vol