Financial Regulatory Forum

By Emmanuel Olaoye, Compliance Complete

WASHINGTON, Dec. 24 (Thomson Reuters Accelus) - The U.S. Chamber of Commerce has been a leader in contesting U.S. regulators’ implementation of the Dodd-Frank Act. Lawsuits challenging the Securities and Exchange Commission and Commodity Futures Trading Commission over the justification for the rules have stopped some rules in their tracks and forced the regulators to hire more economic analysts.

With a new Congress due to start on January 3, Compliance Complete sat down with three senior officials at the Chamber to discuss their priority issues for 2013. These include the Volcker rule banning risky trading by banks, exemptions for non-financial users of derivatives, the role of the Financial Stability Oversight Council in money-market fund reform. (more…)

By Patricia Lee

NEW YORK, May 23 (Thomson Reuters Accelus) – The massive losses which resulted from JPMorgan Chase hedging its positions against derivatives has once again cast the spotlight on the Volcker Rule and whether systemically important financial institutions (SIFIs) are too big to fail, industry observers said. Questions have also been raised about the firm’s hedging strategy, and what constitutes hedging in the first place.

Industry officials in Asia suggested that JPMorgan’s $2 billion hedging losses might embolden regulators to strengthen the Volcker Rule, on the premise that it would be of benefit to SIFIs. The rule, named after former Federal Reserve chairman Paul Volcker, forms part of the Dodd-Frank Wall Street Reform and Consumer Protection Act and has proposed the separation of proprietary trading from commercial banking activity. Most notably, it has argued against investing in derivatives or using derivatives as a hedge on investments. The rule has, however, faced strong opposition from many of the large global financial institutions. (more…)

By Christopher Elias

LONDON/NEW YORK, May 17 (Business Law Currents) - JPMorgan’s disastrous $2 billion hedge loss has raised some thorny issues on management oversight, corporate governance and the effectiveness of the Volcker Rule, as division at the banking giant’s annual general meeting highlight a growing tension between its shareholders and management.

Little more than a week ago, prior to Tuesday’s annual general meeting (AGM), JPMorgan announced that it had incurred a $2 billion loss as a result of a hedge gone wrong from its London offices with the possibility of $1 billion in additional losses to follow. (more…)

By Emmanuel Olaoye, Julie DiMauro and Randall Mikkelsen

NEW YORK, May 15 (Thomson Reuters Accelus) - Corporate executives and boards face big challenges monitoring risk at complex banks like JPMorgan Chase & Co, which was warned by an investor group last year that its board had “serious deficiencies” and was not up to the task.

Challenges to connecting the dots to form a clear risk picture at sprawling global institution with multiple business units like JPMorgan include difficulties tracking data, differing regulatory jurisdictions, and crucially, inadequate corporate governance. (more…)

By Rachel Wolcott

NEW YORK, May 14 (Thomson Reuters Accelus) - JPMorgan Chase & Co’s revelation that it had trading losses of at least $2 billion on a failed hedging strategy may have tipped the hand to one way Wall Street executives plan to get around the Volcker Rule.

The incident shows how firms could use the pending rule’s hedging exemption to do proprietary trades and still technically be compliant with Volcker. It could allow firms to keep some proprietary trading desks, but portray them to regulators as something else, such as portfolio hedging. (more…)

By Thomson Reuters Accelus staff

NEW YORK, Oct. 19 (Business Law Currents) – Banking lawyers should be forgiven if they’re not returning calls right away: they’re busy trying to digest the Volcker Rule (or “the rule”). The proposed rule’s 298-page doorstop represents the collective efforts of the Treasury Department, Fed, FDIC and SEC to implement §619 of the Dodd-Frank Act, which itself added a new §13 to the Bank Holding Company Act of 1956 (the BHC Act). The intent of the Volcker Rule is to “generally prohibit any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund (“covered fund”), subject to certain exemptions.”

So does the Volcker Rule satisfy its mandate? To paraphrase ‘The Simpsons’: yes with an “if,” no with an “unless.” The rule carves out significant exemptions from the proscription against proprietary trading, but each of these exceptions has a number of criteria required to take advantage of the exemption. Moreover, a number of the rule’s measures provide for rebuttable presumptions of non-compliance for certain types of trading activity. (more…)

By Kevin Drawbaugh

WASHINGTON, June 7 (Reuters) – Negotiators from the U.S. Senate and House will begin meeting this week to craft a final Wall Street reform bill, with banks facing changes that threaten their profits, if not their business models.

Some congressional Democrats want to fashion a bill that forces a basic banking industry restructuring, but leaders will have to balance that agenda against the need to forge compromise legislation that retains some Republican support.

Analysts are expecting that fundamental restructuring will be avoided, “This bill is more about profitability and less about viability. That means the legislation will hurt the banking sector, but it will not sink it,” said Jaret Seiberg, a policy analyst at investment firm Concept Capital.

– John Kemp is a Reuters columnist. The views expressed are his own –

By John Kemp

LONDON, March 16 (Reuters) – Paul Volcker’s proposed ban on banks’ proprietary trading or owning hedge funds or private equity funds has been unexpectedly revived in the financial regulation bill published by Senate Banking Committee Chairman Christopher Dodd yesterday.

The Volcker Rule’s surprise survival comes despite fierce opposition from the banking industry and after many commentators had written it off as a short-term political gimmick in the wake of the shock election defeat in Massachusetts. Dodd himself had appeared lukewarm.

WASHINGTON, March 3 (Reuters) – The Obama administration reasserted its commitment to banning proprietary trading by banks with draft legislative language on Wednesday, despite signs that the U.S. Congress is unlikely to adopt such a rule.

In a scant five pages from the Treasury Department, the administration put a two-year phase-in on its “Volcker rule” to curb “prop trading” — or buying and selling of investments on financiers’ own books unrelated to customer needs.

The rule would apply to banks, with limits slapped on large, non-bank financial firms, as well. In addition, banks would be barred from sponsoring or investing in hedge funds and private equity funds, under the administration’s language.

By Karey Wutkowski and Rachelle Younglai

WASHINGTON, March 3 (Reuters) – U.S. banks would be banned from proprietary trading and other large financial firms would face quantitative limits on such activity, according to draft language on the so-called “Volcker rule” from the Obama administration.

The language maintains the toughest components of the proposal first floated in January, despite skepticism from lawmakers and the industry that such restrictions would do little to prevent another financial meltdown like the one that seized markets in 2008.

Banks would also be banned from investing in or sponsoring hedge funds and private equity funds, according to a draft version of the legislative language obtained by Reuters. A final version of the language is expected to be sent to lawmakers later on Wednesday.