What Will Banks Say About This Volcker Rule?
On Tuesday, regulators put out the Volcker Rule proposal for public comment. The proposal will limit Wall Street’s ability to trade for its own profit, consequently kicking off what could potentially become a ferocious lobbying campaign. The public has until January 13, 2012, to comment on more than 350 questions of the proposal.
The goal of the Volcker proposal is to stop banks (NYSE:KBE) from thoughtlessly making risky trades by barring them from short-term trading for their own gains. It will also forbids banks from investing in hedge funds or private equity funds. The proposal does however contain some exemptions that Wall Street worries might harm liquidity of the market and put U.S. financial companies (NYSE:XLF) in a bad situation.
John Walsh, acting director of the Office of the Comptroller of the Currency, said, “The proposed rule has been noted as long, the issues are complex, so I think we made the right decision in allowing the full 90 days for comment.”
The Federal Reserve along with other bank regulators understand it will be difficult to recognize this kind of trading and said identifying the difference between prohibited and permitted trading “often involves subtle distinctions that are difficult both to describe comprehensively within regulation and to evaluate in practice.”
The Volcker rule goes into effect on July 21, 2012 under the Dodd-Frank law, though banks have two years to comply.