Targeted revisions help simplify compliance while adhering to prohibition on proprietary trading; definition of “covered fund” should be addressed expeditiously
CONTACT: Barbara Hagenbaugh
Washington, D.C. – Financial Services Forum President and CEO Kevin Fromer issued the following statement today following issuance of a final rule from the Federal Deposit Insurance Corporation (FDIC) and Office of the Comptroller of the Currency (OCC) on the Volcker Rule:
We look forward to reviewing the rule in its entirety, but initially we are encouraged by the targeted revisions to simplify compliance requirements with the Volcker Rule and provide much-needed clarity. The changes finalized today help address the longstanding, bipartisan concern from Congress and the regulators that the Volcker Rule, as originally implemented, was too complicated, ultimately making it more difficult to serve the needs of savers and investors. It is important to clarify that nothing in this rule would permit large banks to conduct proprietary trading activities in the United States, which are still prohibited under the statute.
Although we support the clarity provided by today’s final rule, it only addresses a portion of the implementing regulations. We urge the regulators to finish the job of Volcker Rule reform and propose expeditiously changes to streamline the overbroad definition of ‘covered fund.’ The current definition unnecessarily restricts the availability of credit to U.S. consumers, capital formation for small businesses and start-ups and other economic activities beneficial to U.S. economic growth. We will continue to work with policymakers to ensure that the rule is implemented in a manner that encourages economic growth and remains faithful to the statute.”
The Volcker Rule was included in the Dodd-Frank Act. Named for Paul Volcker, a former chairman of the Board of Governors of the Federal Reserve System who originated the idea, the rule bans banks from proprietary trading and limits investments in and relationships with “covered” funds. Under the regulation, proprietary trading occurs when a bank trades in the short term for its own benefit without facilitating customer activities or hedging its own risks.
In May 2018, the agencies issued a proposal to simplify and tailor the compliance requirements for the rule. The Financial Services Forum provided comments on the proposal in October. The Forum has also discussed the impact of the Volcker Rule on market liquidity in a BankNotes blog post.
The Financial Services Forum is an economic policy and advocacy organization whose members are the chief executive officers of the eight largest and most diversified financial institutions headquartered in the United States. Forum member institutions are a leading source of lending and investment in the United States and serve millions of consumers, businesses, investors, and communities throughout the country. The Forum promotes policies that support savings and investment, deep and liquid capital markets, a competitive global marketplace, and a sound financial system.