As part of the banking industry’s continuing response to President Trump’s executive order outlining “core principles” for financial regulation, the American Bankers Association today called for a full repeal of the Dodd-Frank Act’s complex Volcker Rule, which requires all banks, regardless of risk, to stop any activities that might be characterized as “proprietary trading” or “covered fund investments.”
In its fifth white paper to the Treasury Department, the association pointed out that the rule has layered on onerous requirements that broadly treat affected activities as prohibited unless they fit into a narrow range of exceptions. Adding to the confusion is a lack of consistency among the federal regulatory agencies as to which activities are permissible under the rule, leading banks to dedicate extensive time and resources to understand which of their activities may violate the rule.
“Rather than solving problems, the Volcker Rule has created problems,” ABA said. “It has operated to impede the efficient operation of the financial system, drive banks away from providing services valued by their customers, reduce competition in affected markets and overall act as a drag on the economy.”
ABA recommended that the rule be repealed in its entirety, and that in the meantime, regulators work to mitigate the rule’s harmful effects by taking steps such as shifting their focus to clearly defining which activities are specifically prohibited under the rule. The association also emphasized the need for closer tailoring of the rule so that it applies only to systemically significant cases, and improved interagency coordination on enforcement. For more information, contact ABA’s Tim Keehan.