Friday, October 26, 2012

Senate Authors of Volcker Rule Say SEC, CFTC and Banking Agencies Must Adopt Final Regulations Implementing the Rule by Year End

Senators Jeff Merkley (D-OR) and Carl Levin (D-MI) called on federal financial regulators to end the delay in issuing a final version of the Volcker Rule. In a letter to the SEC, CFTC and the federal banking regulators, the Senators expressed frustration that months after the deadline for finalizing the Volcker Rule has past staff-level differences at the various agencies may be obstructing progress on removing the loopholes from earlier proposals and finalizing the rule. Senators Levin and Merkley are the co-authors of Section 619 of the Dodd-Frank Act, which directs federal regulators to implement the Volcker Rule. The regulations implementing the Volcker Rule were due two years after the law was passed, on July 21, 2012. Until a strong Volcker Rule is firmly in place and meaningfully enforced, cautioned the Senators, businesses and investors will continue to doubt the U.S. commitment to Wall Street reform, and taxpayers will remain exposed to the dangers of high-risk trading and conflicts of interest by Wall Street’s largest firms.

As with any rulemaking, conceded the Senators, different agencies may have their own perspectives on various provisions.  While cautiously pleased to see reports that a consensus is emerging, they are concerned that some ongoing staff-level differences may be obstructing progress.  Noting that the time for resolving those differences is long overdue, the Senators urged the regulators to move quickly, make the final adjustments needed to simplify and strengthen the October 2011 proposal, and bring the process to a conclusion.  The final regulations needed to implement the ban on high-risk trading and conflicts of interest should be issued without delay, they emphasized, and no later than the end of the year, so that financial institutions can speed the process of eliminating the risks and conflicts of interest that continue to endanger the U.S. financial system.

If because of differing agency procedures or timelines, not all of the regulators can finalize the rule simultaneously, they noted, so be it, adding that the statute was constructed with that possibility in mind.  The Senators are confident that if the majority of regulators act, any remaining agency or agencies will soon follow suit.