The decision from four federal US agencies to extend the comment period for the Volcker rule, a prohibition on proprietary trading activity by banks, has been welcomed by trade body the Securities Industry and Financial Markets Association (SIFMA).
On 23 December, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency and the Securities and Exchange Commission announced that the comment period for the new rule would be extended until 13 February 2012, a month after the initial deadline.
The four regulators, which have been tasked with jointly drafting the proposal, said the delay was intended to allow interested parties more time to analyse the issues related to the Volcker rule and prepare their comments.
“The announcement that regulators will extend the comment period will allow commentators sufficient time to adequately address a very complex rule proposal that includes nearly 1,400 questions,” said Kenneth Bentsen, executive vice president, public policy and advocacy, SIFMA, which represents US banks and asset managers. “This extension also allows commentators the time to provide regulators with the necessary information to ensure crafting a rule that does not unnecessarily impede liquidity in capital and credit markets at the expense of capital formation and economic growth.”
The trade body added that the extension would also help better coordinate the drafting of the Volcker Rule with the US futures watchdog the Commodity Futures Trading Commission, which is due to publish its own proposal in the coming months.
The Volcker rule, named after former Federal Reserve chairman Paul Volcker, is intended to restrict US banks’ proprietary trading activities and investments in private equity and hedge funds in order to reduce risk in the US banking system. The rule was introduced as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
among market participants include the rule’s definition of proprietary trading and application to foreign entities.