Lew ‘optimistic’ Volcker rule will be finished this year
Treasury Secretary Jack Lew said Tuesday that he is optimistic the long-delayed Volcker rule governing proprietary trades will be completed this year.
“I‘m optimistic that we will see a rule by the end of the year,” he said at a Wall Street Journal event. “It has to come to closure.”
“That is what I have urged them to do and just last week the president reiterated it,” Lew added.
The Volcker rule was born from the Dodd-Frank financial reform law, and independent agencies have been quietly drafting it for years under intense lobbying from Wall Street. The provision aims at barring “proprietary trading,” which is trading conducted by banks seeking their own profit and not at the direction of clients.
However, regulators have struggled to come up with rules to implement that ban while also permitting trades that allow the institution to hedge its risk, which is permitted under the provision. The rule also limits the associations banks can have with hedge funds and private equity funds.
Lew said that given the 2008 financial crisis, it is better for agencies to err on the side of being too restrictive and to revise the rule later. He acknowledged that getting the balance right and allowing the banks to make markets is a “complicated business.”
A number of financial regulators have been working together to finalize the rule, and hope to have it completed by the end of the year. But even if the rule is finalized in 2013, regulators may still give banks more time before the rule takes effect, to allow them to comply with the new requirements.
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