Thursday, April 26, 2012

US Senators Say Regulations Implementing Dodd-Frank Volcker Rule Must Be Finalized This Summer

Stating that the Volcker Rule is a critical protection to help ensure that a financial crisis of such magnitude does not happen again, 22 US Senators said that the regulations implementing the Dodd-Frank Volcker Rule provisions must be finalized this summer. In a letter to the SEC and the banking agencies, the Senators, led by the co-authors of the Volcker Rule provisions Senators Calr Levin (D-MI) and Jeff Merkley (D-OR), said that, while the proposed regulations ate not perfect, they should not be delayed or scrapped.  Rather, the Senators urged the regulators to adopt the best elements from the proposed regulations; eliminate loopholes; draw clear lines based on objective data and observable markets; strengthen CEO and board-level accountability and public disclosure; and provide coordinated and consistent enforcement, including data sharing by regulators.

The financial institutions that will be directly impacted by the Volcker Rule have already had nearly two years to realign their businesses to comply with the broad contours of the rule, noted the Senators, and many have already taken steps to do so.  The statute itself provides for an additional two years,  extendable up to five years, for financial firms to come into compliance with the Volcker Rule.  During the period, additional guidance may be offered as new data becomes available or with with respect to particular provisions that may require deeper analysis, for example, prohibited conflicts of interest or high-risk trading strategies.  Setting out this guidance now is the path to providing industry, investors, and taxpayers the certainty they want regarding how this important firewall will be applied, emphasized the Senators.

US capital markets will be the stronger under the Volcker Rule, they noted. With fewer conflicts of interest and more reliable market-makers, said the Senators, US financial markets will be healthy and vibrant, just as they were when the Glass-Steagall Act protected the financial system. But the SEC and the banking regulators need to fulfill the statutory mandate, concluded the Senators.

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