Which law primarily affects the trading practices of banks and their risks?

The Dodd-Frank Act is a significant piece of legislation that was enacted in response to the 2008 financial crisis, and it primarily affects the trading practices of banks and their associated risks. This law was designed to increase transparency in the financial system, improve accountability, and reduce the likelihood of future financial collapses. It includes various provisions that regulate derivatives, stress tests for financial institutions, and enhanced consumer protection measures.

One of the notable aspects of Dodd-Frank is its focus on systemic risk; it created the Financial Stability Oversight Council (FSOC) to monitor and identify emerging risks to the financial stability of the United States. Additionally, the Volcker Rule, which is part of Dodd-Frank, restricts banks from engaging in proprietary trading and from owning or investing in hedge funds and private equity funds. This helps mitigate the risks Banks take in their trading activities, aiming to protect consumer deposits and the broader economy.

Other options, while relevant in the financial regulatory landscape, do not address the broader implications for trading practices and risks as comprehensively as the Dodd-Frank Act does. For example, Sarbanes-Oxley focuses more on corporate governance and financial disclosures rather than direct trading practices. RegNMS addresses market structure