U.S. financial regulators say firms will have two years to comply with the Volcker rule, which imposes restrictions on banks’ proprietary trading, hedge fund and private equity activities.
The US Federal Reserve Board said Thursday that firms covered by the so-called Volcker Rule will have the full two-year period provided by the statute to fully conform to the rule, which imposes prohibitions and restrictions on proprietary trading activities, and on hedge fund and private equity fund activities and investments by banks.
The Fed says that it has received a number of requests for clarification on the deadlines imposed by the rule. On Thursday it issued a statement to address this question. It notes that the various regulators, including the Fed, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission, plan to administer their oversight of the banks under their respective jurisdictions in line with that statement.
The agencies have invited public comment on a proposal to implement the Volcker rule, which has proven very controversial with financial firms in the U.S. and elsewhere, including Canada. The regulators have not yet adopted a final version of the rule.
In response to the regulators’ announcement, securities industry lobbyists, the Securities Industry and Financial Markets Association, said that the move was appropriate and necessary. Kenneth Bentsen, Jr., executive vice president, public policy and advocacy at SIFMA, said that the guidance, “is critically important because it alleviates concerns over potentially having to comply with a rule whose details had not yet been made clear.”
“SIFMA continues to believe that the rule as proposed is structurally flawed, particularly as it relates to the assumption that any activity is prohibited proprietary trading unless otherwise explicitly prescribed,” he added. “We believe this is inconsistent with Congressional intent and results in an overly narrow interpretation of the permitted activities that constrains the beneficial effects those activities have for corporate issuers and investors that rely on the capital markets to meet their business and investment needs.”