Volcker Rule Changes Likely as Focus Shifts to Regulators

By Rob Tricchinelli

The Volcker Rule looks unlikely to survive in its present form, given an increased willingness from federal regulators to revisit the Dodd-Frank-imposed ban on proprietary trading.

That rule was implemented jointly by five federal regulators, including the Federal Reserve and Office of the Comptroller of the Currency. Top officials from both agencies said June 22 there is opportunity to ease off of the rule’s complexity and reach.

“In our view, there is room for eliminating or relaxing aspects of the implementing regulation in ways that do not undermine the Volcker Rule’s main policy goals,” Jerome Powell, a Federal Reserve governor, said during a Senate Banking Committee hearing.

Powell is the Fed’s main bank oversight official for now but will move out of that role once a vice chairman for supervision is nominated by President Donald Trump and confirmed by the Senate.

‘Bipartisan Consensus’

Acting Comptroller of the Currency Keith A. Noreika, also temporarily in that position, called for a retooling of the Volcker Rule. “A bipartisan consensus is emerging that the Volcker Rule needs clarification and recalibration to eliminate burden on banks,” he said. “I hope we, the agencies, can move forward on seeking public comment on this topic soon.”

The rule was adopted in conjunction with the Securities and Exchange Commission, Federal Deposit Insurance Corporation, and Commodity Futures Trading Commission, and those agencies could revisit the rules together.

Some the “bipartisan consensus” mentioned by Noreika emerged at the hearing as well.

Senate Banking Committee Chairman Mike Crapo (R-Idaho) said there is bipartisan interest in “simplifying the Volcker Rule.” Panel Democrat Sen. Heidi Heitkamp (N.D.) was inclined to agree.

“Many current and former regulators also publicly state that the Volcker Rule is way too complicated,” she said. “It is my experience when a rule’s too complicated, there isn’t much compliance, so it doesn’t really get you what you need.”

Treasury Report

The testimony follows a June 12 report from the Treasury Department that recommended exempting smaller banks from Volcker Rule prohibitions, simplifying the definition of “proprietary trading,” and give market-makers and hedgers relief from the ban.

About two-third of the report’s overall recommendations could be done only with regulatory action and without legislation, officials and analysts have said.

While the committee’s ranking Democrat, Sen. Sherrod Brown (Ohio), didn’t single out the Volcker Rule, he called the Treasury report “misguided.”

“These recommendations would make the watchdogs’ jobs harder, and prevent them from spotting risks before they balloon out of control,” he said. “They would make our system less stable and leave consumers more vulnerable.”

To contact the reporter on this story: Rob Tricchinelli in Washington at rtricchinelli@bna.com

To contact the editor responsible for this story: Michael Ferullo at MFerullo@bna.com

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