The Securities Industry and Financial Markets Association (SIFMA) has voiced concerns the Volcker rule will introduce unintended consequences into the market due to the fragmented nature of its development across regulators.
Kenneth Bensten, president and CEO of SIFMA on Wednesday testified to the House Financial Services Committee on the expected impact of the Volcker rule and said although the concept of the rule sounded straightforward, “at the level where the regulation impacts real businesses and investors in the real economy, time and experience have shown that it is, in fact, exceedingly complex.”
A final version of the Volcker rule was agreed in December that will restrict banks’ proprietary trading activities. Five regulatory bodies developed the final rule two years after President Obama passed the Dodd-Frank Act into law, which included provisions for the Volcker rule.
“The law tasked five different regulators…with writing the rule, but it did not task any one agency or the agencies collectively with the interpretation, examination, supervision or enforcement of final regulation,” Bentsen said.
To address this, Bensten believes the Financial Stability Oversight Council, an arm of the US Treasury, should coordinate Volcker’s implementation.
A failure to have a transparent and consistent approach to addressing key issues within the rule, he said, would increase implementation costs and delay achievement of the overarching regulatory goals.
The five regulators behind the rule’s development were the Commodity Futures Trading Commission, the Federal Reserve Board, the Federal Deposit Insurance Corporation, the Comptroller of the Currency and the Securities and Exchange Commission.
Participants have until July 2015 to fully comply with the requirements of the rule.