SIFMA supports ‘simple, transparent and efficient’ Volcker rule
23 October 2018 New York
Image: Shutterstock
The Securities Industry and Financial Markets Association (SIFMA) has expressed its support in making the Volcker Rule regulations more “simple, transparent and efficient”, in a comment letter on proposed changes to the rule.
SIFMA noted, however, that portions of the proposal fail to meet this goal and would undermine the ability of banking institutions to act for customers in the capital markets.
SIFMA said that its comments, which address the proprietary trading, covered funds and compliance and metrics provisions of the proposal, were sent to the proposing agencies: the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
SIFMA added that its Municipal Securities Division also filed a comment letter on the proposed changes.
That letter addresses several questions raised by regulators in their proposing release about the interaction between the rule and municipal tender option bonds (TOBs), a tool used by banks to support market liquidity.
The letter recommends, consistent with Congressional intent, that TOBs be exempt from the rule’s covered funds provisions.
SIFMA said it believes that many of the proposed amendments to the rule’s proprietary trading provisions would improve the efficiency of financial markets, promote the safety and soundness of the US financial system, and allow banking entities to better serve their customers.
However, the inclusion of an extremely overbroad accounting prong undermines many of these benefits by expanding the regulatory definition of trading account far beyond the statutory definition and Congressional intent.
This proposal would prohibit banking entities from engaging in a wide range of longer-term transactions.
SIFMA said it believes this would likely result in decreased long-term investment in the US capital markets and decreased liquidity in times of stress.
It added that the definition of covered fund is significantly overbroad and unduly complex as it “unnecessarily restricts the ability of banking entities to serve the public interest in promoting US economic growth and job creation by prohibiting or restricting their ability to provide asset management services, customer facilitation services and long-term debt and equity financing to US businesses indirectly through fund structures, even though they are expressly permitted to do so directly”.
Kenneth Bentsen, SIFMA president and CEO, said: “The Volcker Rule as currently implemented unnecessarily restricts banking and capital markets activities explicitly permitted by Congress to the detriment of customer facilitation.”
He added: “The rule’s current structure negatively impacts capital formation and economic growth and could exacerbate financial harm during times of stress.”
“The regulators’ willingness to revisit the rule is an important recognition of the underlying problems with the current rule, and while an important first step at simplification, our comments provide substantial recommendations to assist in achieving their goal.”
SIFMA noted, however, that portions of the proposal fail to meet this goal and would undermine the ability of banking institutions to act for customers in the capital markets.
SIFMA said that its comments, which address the proprietary trading, covered funds and compliance and metrics provisions of the proposal, were sent to the proposing agencies: the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
SIFMA added that its Municipal Securities Division also filed a comment letter on the proposed changes.
That letter addresses several questions raised by regulators in their proposing release about the interaction between the rule and municipal tender option bonds (TOBs), a tool used by banks to support market liquidity.
The letter recommends, consistent with Congressional intent, that TOBs be exempt from the rule’s covered funds provisions.
SIFMA said it believes that many of the proposed amendments to the rule’s proprietary trading provisions would improve the efficiency of financial markets, promote the safety and soundness of the US financial system, and allow banking entities to better serve their customers.
However, the inclusion of an extremely overbroad accounting prong undermines many of these benefits by expanding the regulatory definition of trading account far beyond the statutory definition and Congressional intent.
This proposal would prohibit banking entities from engaging in a wide range of longer-term transactions.
SIFMA said it believes this would likely result in decreased long-term investment in the US capital markets and decreased liquidity in times of stress.
It added that the definition of covered fund is significantly overbroad and unduly complex as it “unnecessarily restricts the ability of banking entities to serve the public interest in promoting US economic growth and job creation by prohibiting or restricting their ability to provide asset management services, customer facilitation services and long-term debt and equity financing to US businesses indirectly through fund structures, even though they are expressly permitted to do so directly”.
Kenneth Bentsen, SIFMA president and CEO, said: “The Volcker Rule as currently implemented unnecessarily restricts banking and capital markets activities explicitly permitted by Congress to the detriment of customer facilitation.”
He added: “The rule’s current structure negatively impacts capital formation and economic growth and could exacerbate financial harm during times of stress.”
“The regulators’ willingness to revisit the rule is an important recognition of the underlying problems with the current rule, and while an important first step at simplification, our comments provide substantial recommendations to assist in achieving their goal.”
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