Financial Regulatory Forum

COLUMN-Volcker Rule unexpectedly revived by Dodd bill: John Kemp

– 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.

In fact, Section 619 of the bill (“Restrictions on Capital Market Activity by Banks and Bank Holding Companies”) would give legislative effect to the proposals almost exactly as outlined by President Barack Obama at the press conference in January.

BANS ON PROP TRADING, HEDGE FUND SPONSORSHIP

Section 619 (b) instructs the new Financial Stability Oversight Council (FSOC) to issue rules that “prohibit proprietary trading by an insured depository institution, a company that controls an insured depository institution or is treated as a bank holding company”.

Obama reasserts Volcker rule, U.S. Senate bill seen

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.

Obama lays out “Volcker rule” specifics for Congress

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.

BREAKINGVIEWS-Volcker Rule looks more like hype than future law

"Just a photo op"?

"Just a photo op"?

 – The author is a Reuters Breakingviews columnist. The opinions expressed are his own – 

By James Pethokoukis

WASHINGTON, Feb 15 (Reuters Breakingviews) – The much-hyped Volcker Rule proposal is failing fast in the U.S. Congress. Paul Volcker probably isn’t that surprised. The former Federal Reserve chairman joked he was “just a photo op”, even after President Barack Obama’s public embrace of his proposal to limit bank proprietary trading. The problem is that legislators are no longer interested in sweeping reform.

Any reform plan has to get through the U.S. Senate Banking Committee. Now that the mood of crisis has passed, Wall Street campaign contributions and Republican intransigence are paramount there. That means the new negotiating tag-team — Democrat Chris Dodd, the chairman, and Republican freshman Bob Corker — is not going to agree on anything radical. Corker says the Volcker Rule will not be a “major topic” for discussion, and that is probably OK with much of the committee.

EU says won’t copy U.S. bank plan; bank ethics face scrutiny over Greece

Watching the banks

Watching the banks

  BRUSSELS, Feb 16 (Reuters) – Banks in the European Union won’t face a ban on proprietary trading, the bloc’s executive body said on Tuesday, but warned the sector to check its ethics.

Securitised products and derivatives, two areas where banks have raked in revenues over the years, will also come under closer EU scrutiny, officials said.

U.S. President Barack Obama has proposed banning some banks from trading on their own account and limiting their size by forcing divestments of any hedge fund and private equity operation to make them less likely to need public bailouts.

EU states cool to Obama proprietary trading ban for big banks -document

BRUSSELS, Feb 15 (Reuters) – If U.S. President Barack Obama’s plan to ban proprietary trading at some banks was applied in the European Union, it could be problematic for the bloc’s universal banks, an EU document obtained by Reuters said.

EU finance ministers, following a call from the Netherlands which backs the proposal, will discuss its possible impact on Europe at a meeting on Tuesday but no consensus is expected.

The plan, dubbed the “Volcker rule,” was drafted by White House adviser and former Federal Reserve Chairman Paul Volcker, stunned global markets last month and is already facing resistance in Congress.

US Stock exchange heads take aim at ‘Volcker rule’

By Jonathan Spicer

NEW YORK, Feb 9 (Reuters) – The heads of the top U.S. stock exchanges have poured cold water on the Obama administration’s plan to bar banks from proprietary trading.

The chief executive of NYSE Euronext said on Tuesday the president’s plan falls short of targeting what caused the financial crisis, while his counterpart at Nasdaq OMX group Inc, the day before, said the plan would probably have to be changed.

Obama last month surprised Wall Street with the ambitious proposal to limit risky trading by banks. Dubbed the ‘Volcker rule’ after Paul Volcker, the White House economics adviser, it would bar banks from proprietary trading, or placing bets on markets with their own money.

Obama bid to rein in banks meets Senate resistance

By Kevin Drawbaugh

WASHINGTON, Feb 4 (Reuters) – The U.S. Senate on Thursday looked increasingly likely to adopt, at best, only a watered-down version of the Obama administration’s ambitious proposal to limit risky trading by banks.

After two hearings in three days on the issue, Senate Banking Committee Chairman Christopher Dodd told reporters it will be difficult to legislate a curb on bank trading practices as specific as the White House proposed last month.

He said it would be easier to include something less ambitious in a sweeping package of financial regulation reforms, under development for more than a year now, which aides said was fast nearing completion.

Trading curbs should apply to all banks – U.S. Treasury’s Wolin

WASHINGTON, Feb 2 (Reuters) – Commercial banks should not be allowed to establish or maintain a separate trading desk, capitalized with their own resources and unrelated to customer business, a top U.S. Treasury official said on Tuesday.

At a hearing to examine a White House proposal to restrict banks’ proprietary trading, Treasury Deputy Secretary Neal Wolin said banks should not be allowed to use such trading desks to speculate on the price of oil, gas or equity securities.

In January, the Obama administration proposed limiting commercial banks’ ability to engage in proprietary trading or do business with a hedge fund or private equity fund.

US bank regulator: proprietary trading not at core of crisis

WASHINGTON, Feb 2 (Reuters) – The regulator of the largest U.S. banks said on Tuesday that proprietary trading was not at the root of the financial crisis and warned that excessive limits could impair some of banks’ central functions.

“It’s one thing to talk about pure proprietary trading as a business where the bank is in the business of taking bets on particular markets for its own account. And I understand the concern with that going forward, although this was not a big source of the problems that led to the crisis,” Comptroller of the Currency John Dugan told reporters on the sidelines of a securitization conference.

President Barack Obama late last month proposed new limits on big banks’ risk-taking, including curbs on commercial banks’ ability to engage in trading for their own profit instead of for clients.

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