After more than three years and some 18,000 comments from interested parties, the financial sector’s major regulatory agencies are locked in battle over how best to implement the Volcker Rule. We wholeheartedly support the Volcker Rule, but fear that regulators are making the proposed regulations more complex than necessary or appropriate.
The Volcker Rule, which is part of the Dodd-Frank financial reform law, is intended to impose strict limits on banks engaging in “proprietary trading” – i.e., betting the bank’s capital by significant speculative trading in financial instruments. Congress, as usual, gave general direction to the regulators to figure out how to implement the concept.
The regulators’ proposed rulemaking on the Volcker Rule is a whopping 298 pages of complexity that is not only difficult to understand but nearly impossible to monitor and regulate. There is a better way, as we suggested in a previous BankThink post. We believe the time is right for regulators to take a more holistic view of the issues.