Five regulators working on the Volker rule may delay releasing a final version of the rule until the second half of the year. The Wall Street Journal reports that this is later than previously expected, and that the delays are caused by how complex creating a rule that bans risky bets has become.
Dodd-Frank & Volcker, SEC
The Volcker rule was passed as part of the 2010 Dodd-Frank financial overhaul. Banks are already aware of the broad outlines of the rule, but the specifics cannot be finalized until regulators approve the final version. Ken Bentsen, acting chief executive of the Securities Industry and Financial Markets Association, told The Wall Street Journal, “It’s hard to build a compliance system around something when you don’t know what it’s going to require.” Mr. Bentsen said that his trade group is considering asking regulators to extend the rule’s effective date beyond July 2014, due to the delays.
Negotiations between many banking regulators, including the Federal Reserve and officials from the Securities and Exchange Commission, are causing the delay. Regulators are also having difficulty distinguishing between a firm’s risky trading, or proprietary trading, and the buying and selling of securities on behalf of clients. Officials at the SEC have taken interest in this issue, since the agency directly oversees broker dealers that conduct these activities.
In October, a rift was discovered between the SEC and banking regulators over several issues covered in the Volcker rule, although the rule was still expected to be finished in the first quarter. Despite this goal, overcoming disagreements and translating the rule’s concepts into a language regulators are able to agree upon has proved to be more difficult than initially expected. The SEC has also struggled with their leadership, as their former chairman Mary Schapiro left in December. SEC chairman Mary Jo White is expected to be replaced in the coming months, although The Wall Street Journal reports that it isn’t clear what position Ms. White will take on the Volcker rule, or how involved she will be in these negotiations.
Many lawmakers are also concerned about the delay because the rule has been in regulatory for two and a half years, while big banks trading activities have continued to grow.