In a letter to the SEC,
CFTC and the banking agencies implementing the Volcker Rule provisions of the Dodd-Frank
Act, 35 House Members said that the Volcker regulations must be finalized this
summer. While the proposed regulations are not perfect, acknowledged the
Members, they should not be delayed or scrapped.
Rather, the Members,
many of whom sponsored and co-sponsored the Volcker provisions, urged the SEC,
CFTC and banking agencies to adopt the best elements from the proposal, eliminate
unnecessary 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. They
also urged the regulators to maintain and ensure ease of compliance for the overwhelming
number of community and regional banks that do not engage in covered
activities.
The Volcker Rule provisions of the Dodd-Frank Act (Section
619) prohibit financial institutions from engaging in proprietary trading and
sponsoring and maintaining hedge funds, while permitting market making and the
hedging of risk. While the vast
majority of banks will be unaffected by the
provisions, observed the Members, the prohibition on proprietary trading will unquestionably reduce some banks' trading.
Proprietary trading, regardless of where it occurs within a bank, is prohibited by Section 619. The Members noted that the
banks 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, and
many have already taken steps to do so. The Dodd-Frank Act provides for an
additional two years, extendable up to five years, for financial firms to come
into compliance with the Volcker Rule. The House Members suggested that during
this period additional guidance may be offered as new data becomes available or
with respect to particular provisions that may require deeper analysis, for
example, prohibited conflicts of interest or high-risk trading strategies.