The Volcker Rule, which would prevent banks from engaging in proprietary trading, is facing a new wave of criticism at home and abroad. The U.S. Treasury has given banks have until 2014 to comply with the Volcker Rule.
Volcker in the UK
John Vickers, chairman of Britain’s Independent Commission on Banking, said this week that banks in the U.K. did not have the resources to regulate proprietary trading, and therefore should not be subject to the Volcker Rule.
Speaking to the Parliamentary Commission on Banking Standards, Vickers that not enough data existed to delineate between market making and proprietary trading. As a result, the preferable option would be to maintain a buffer between investment banking and consumer funds from within the bank. In the respect, Vickers is reiterating the already established line from the ICB.
“If one had ring fencing and Volcker there would be two boundaries to police,” Vickers said. “Volcker draws the line in a very difficult, almost excruciatingly difficult, place.”
Paul Volcker disagrees. The namesake of the Volcker Rule, and the inspiration for other mandates of recent financial regulation, Volcker believes that financial entities would work to bridge any internal buffers in the long-term. Given that the U.K. Treasury plans to install the Vicker’s Plan over the next several years, it seems that the U.K. could be the land of Vickers, and the U.S. might become the land of Volcker.
Will SEC Prioritize Volcker Rule in 2013?
It is perhaps too early to determine what aspects of financial regulation will be privileged by newly installed SEC Chairman Elisse Walter. Nevertheless, one SEC Commissioner, Daniel M. Gallagher, has started to suggest that instead of taking a secondary role, the SEC should re-propose the Volcker Rule.
The SEC “could be focusing on other matters rather than spinning their wheels with no end in sight,” Gallagher said.