Industry Group Raises Alarms Over Volcker Rule

Industry Group Raises Alarms Over Volcker Rule

By DEE MOORE 

     
     (CN) - The Securities Industry and Financial Markets Association has asked for a comprehensive review of the Volcker Rule.
     The industry group sent an open letter to Representative Spencer Bachus, the chairman of the House Financial Services Committee chairman, in response to his call for public comment on the rule.
     "We share the Chairman's concerns that the Volcker Rule ... could have substantial adverse effects on the U.S. and global economies, the competitiveness of U.S. financial institutions, the availability of capital and credit, market liquidity, job growth and a wide range of market participants and investors," the letter states.
     SIFMA asked Bachus for the evaluation in part because the approval process was "hampered by the absence of considered fact-finding and solicitation of informed viewpoints."
     According to the letter, this was because the rule was proposed after the House had already passed its financial reform bill. The goup wants the committee to consider the rule's impact on market liquidity.
     "We strongly believe that the Volcker Rule in its current form will result in costs and other burdens on market participants, including institutional and retail investors, and the wider economy that Congress could not have intended, and will, in fact, increase the likelihood of financial instability," the letter states.
     The agency points to a recent study made by the US Chamber of Commerce's Center for Capital Market's Comprehensiveness which states that the Volcker Rule "will have a significant negative effect on market making and liquidity provision for many securities" as well as making bank risk management less efficient.
     This, according to SIFMA, is supported by a study conducted by Oliver Wyamn, which was commissioned by the group in 2011.
     The Wyman report cites higher funding and debt costs for U.S. companies as a result of the rule which will, also according to the study, make it harder on the American public to "build wealth through participation in liquid, well-functioning securities markets."
     "In light of the risks to the economy, the agencies charged with implementing the Volcker Rule have responsibly proceeded in a very deliberate manner," the group states in its letter to Bachus.
     As an alternative to the Vocker Rule, the agency proposes that the government rely on already enacted or purposed legislation.
     "One wholesale alternative to the Volcker Rule that we urge Congress to explore is reliance on already proposed capital rules and regulations that are under consideration and being implemented," the letter says.
     If this is not an option, the association suggests dramatic modifications to the rule such as reversing "the presumption that all short-term principal trading is impermissible and provide a targeted definition of 'proprietary trading' and clear safe harbors ... should Congress determine to retain the Volcker Rule framework as enacted, we believe that several modifications to the existing statute are necessary to achieve its goals without harming the ability of banking entities to continue to provide client-oriented financial services," the letter states.
     By writing the letter, the group hopes to provide Bachus and the committee with not only criticisms of the rule but viable alternatives on how to proceed with or without it, according to a SIFMA spokesman.
     "Chairman Bachus called for the public comment on what legislative alternatives or revisions people thought would be necessary for the Volcker Rule. Since Dodd-Frank has passed, SIFMA has been a vocal participant in the rulemaking process surrounding the Volcker Rule. We've submitted studies and comment letters to regulators, all of which can be found on our website," SIFMA public affairs director Andrew DeSouza told Courthouse News. "We felt it would be incumbent for us to continue that engagement with offering our thoughts to Chairman Bachus."
Copyright by Courthouse News Service 2012

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