WASHINGTON -- The Volcker Rule may finally be out, but the process of understanding the intricacies of the complex regulation that bans the largest banks from making risky trades has only just begun.

Financial institutions and their respective lawyers are poring over the 71-page rule, in addition to the 800-plus pages of supplementary materials, to determine how they will comply with it when it will rely so heavily on examiners’ subjectivity.

The controversial ban drafted by the five regulatory agencies is intended to raise a wall between proprietary trading and market-making activities at commercial banks.  But regulators were careful to avoid drawing bright lines and setting explicit limits, introducing numerous gray areas with ample room for judgment.

Despite some media reports that rushed to declare the final Volcker Rule “tougher” or “weaker” than a proposal released two years ago, most insiders said it still isn’t clear.

“It’s a monster,” said Gil Schwartz, a partner at Schwartz & Ballen and a former attorney for the Fed. “Anybody that comes up with a conclusion that the rule is tougher, easier, what the impact will be, is kind of a fool’s errand, because it’s much, much, too difficult to understand as a whole until you really understand what changes remain and how it’s going to impact the institutions.”

Lawyers representing clients of major banks that will be impacted by the regulation were cautious in their initial comments following the release of the final rule on Tuesday, citing the fact that the opportunity to be “fast and wrong” will be numerous in the early days.

“Speed kills in this context,” said a banking lawyer, who requested anonymity.

 As lawyers undertake line by line comparisons to the initial 2011 proposal, it’s likely that conclusions will turn on even the smallest of word changes. It may ultimately wind up that the changes are subtle, but until it’s fully examined, few feel comfortable declaring a victory.

“There are clearly significant changes,” said Schwartz. “People are still trying to get a handle on what the impact may be.”

Just how difficult it will be for large financial institutions like JPMorgan Chase and Goldman Sachs to comply with is unclear. Speaking with investors on Wednesday, Jamie Dimon, JPMorgan’s chief executive, sounded optimistic about the final rule.

"I'm glad that we now have certainty," Dimon said. "I think we'll be able to manage with Volcker."

But compliance may ultimately depend on the fine print of the rule, observers said. For example, the final rule leaves room for interpretation in whether certain hedging activities are exempted from the ban or not.

“There are aspects of the hedging exemption that still involve meaningful judgments,” said Robert Maxant, a partner with Deloitte & Touche and head of the firm’s effort on the Volcker Rule. “The demonstrable reduction in risks is a new requirement that raises the bar, but still leaves open the question of how would one define ‘demonstrable.’ It’s going to be a matter of judgment.”

But other observers said the subjectivity inherent in the final rule was to be expected, considering the complexity of the provision and regulators’ desire to remain flexible.

 “The 10 Commandments are subject to interpretation,” said Karen Shaw Petrou, managing partner at Federal Financial Analytics. “I don’t know any rule that isn’t. I don’t think it’s a reasonable expectation that any rule won’t have potential issues or enforcement variance among all the agencies in doing it, but I still go back and say I don’t think it’s anything like the issues where industry was basically holding its breathe pending the final rule.”  

The discretion in how the new rule is applied will fall to examiners, whose enforcement is certain to vary across the various agencies, a concern raised by Federal Reserve Board Gov. Sarah Bloom Raskin and Comptroller of the Currency Thomas Curry on Tuesday, who both called for formal supervisory guidance to be issued as quickly as possible to facilitate enforcement.

“There is no doubt judgment is needed here,” Maxant said. “In an examination, judgment would need to be applied, and I think judgment as opposed to bright lines does make it a little bit harder to sort through those issues.”

What complicates matters, some lawyers argue, is the subjective nature of the Volcker Rule itself as written in the Dodd-Frank Act.

“You’re trying to regulate a behavior which by its nature has a certain element of subjectivity to it,” said Greg Lyons, a partner at Debevoise & Plimpton.

While regulators will rely on examinations, they will also likely draw from several metrics that will be applied to banks in order to perform horizontal comparisons across the firms to determine if there are any outliers in particular areas.

Regulators agreed to give banks an additional year to figure out how to prepare for the rule, but the issue is likely to generate discussion between the agencies, banks and trade groups attempting to nail down specifics.

“The Fed’s extension of the conformance period is very important, as it appropriately recognizes that banks will need sufficient time to develop effective compliance regimes now that the final rule is out, a process that will require substantial planning and significant interaction with the regulators,” said Mitch Eitel, co-head of the financial institutions group at Sullivan & Cromwell.

There already appears to be some movement by the industry to seek further guidance from regulators, but as many lawyers pointed out, this will likely be a continuous dialogue between regulators and banks over the coming months.

“If there ever was a rule where the devil was in the details, it is the Volcker Rule,” Lyons said.  “It’s going to require an enormous amount of effort by the banks over the coming months to figure out exactly what this does mean for them.”

Donna Borak is the Federal Reserve reporter for American Banker.