The Fed in April said banks have until July 2014 to fully conform their activities and investments to the Volcker restrictions. The Fed has the authority to extend that date.
Dodd-Frank charges five agencies -- the Office of Comptroller of the Currency, Federal Deposit Insurance Corp., the Commodity Futures Trading Commission, the Fed and the SEC -- to write regulations implementing the rule. The Treasury Department must coordinate the agencies’ rulemaking.
When Schapiro steps down this week, she’ll leave behind a commission composed of two Democrats and two Republicans. The split could delay dozens of rules, including Volcker.
The industry has complained the complex rule will have unintended consequences.
“The level of complexity is so high and your need to do as little damage as possible to the capital markets is so great you need to change your thinking,” Sifma’s Ryan said yesterday. “The idea that the presumption which they built into the original proposal which is prop trading unless you can prove otherwise, really needs to be flipped the other way.”
Representative Barney Frank, the Massachusetts Democrat who co-wrote the law that created the Volcker rule, said its complexity is a product of changes the industry requested.
“When the Volcker rule was first proposed, many in the financial community asked that it take into account this that and the other,” Frank, who is retiring, said at today’s hearing. “There’s been an effort to try to accommodate this, and now that’s being used against the people who have listened to some of these comments.”
Dennis Kelleher, president and chief executive officer of Better Markets Inc., said in fact the Volcker rule isn’t as complex as bankers claim.
“The Volcker rule is, in many ways, very simple: It prohibits the handful of biggest too-big-fail banks from making high risk speculative bets, typically very, very big bets, usually but not always with the banks’ own money as distinguished from investing and trading their customers’ money on their customers’ behalf,” he said in testimony prepared for the hearing. “This type of trading is nothing more than gambling.”
The rule also limits banks’ investments in private-equity and hedge funds. The industry has argued that the rule’s definition of such funds is too broad and would encompass other securitized vehicles used for lending.
“Unless corrected through regulation or legislation this over-breadth could prohibit securitization vehicles, cash management entities, certain joint ventures and even internal holding companies simply because they meet a technical legal standard that is common among true investment funds,” Thomas Quaadman, vice president of the Center for Capital Markets Competitiveness at the Chamber of Commerce, wrote in prepared testimony.