A more thorough explanation:

The Volcker Rule is a set of regulations created under the Dodd-Frank Act to reduce risk in banking institutions by separating investment banking and commercial banking. The rule has two main parts:

• A ban on proprietary trading, which is when banks use their own funds to make high-risk investments for their own profit.
• A limit on banks' investments in hedge funds and private equity funds.

The Volcker Rule was created in response to the Global Financial Crisis, which was caused in part by risky investments made by banks. Before the crisis, investment banking and commercial banking were required to be separate, but this changed in the 1990s. The Volcker Rule attempts to bring back some of the separation between the two types of banking.

For example, the Volcker Rule prohibits banks from making proprietary trades in most circumstances. This means that banks cannot use their own funds to make high-risk investments for their own profit. There are some exceptions, such as for underwriting and market making activities, but these exceptions require reporting and explanations. The rule also prohibits banks from owning or entering into partnerships with certain types of funds, such as hedge funds and private equity funds.

The Volcker Rule has faced criticism for limiting bank profits and restricting capital. In 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act loosened some of the restrictions of the Volcker Rule, particularly for smaller banks.

To comply with the Volcker Rule, banks must create an internal compliance program that ensures limits are followed, documentation is kept, and reporting requirements are met. Larger banks and those with large investment operations must meet higher compliance, prudential, and monitoring requirements.