Andy Rain/European Pressphoto Agency
Paul Volcker in London on Wednesday.
LONDON — If complicated financial trades have a benefit for the wider economy, the former Federal Reserve chairman Paul A. Volcker isn’t sure he has seen it.
“The economic and social value of much of the trading and innovative financial engineering is questionable,” Mr. Volcker said during almost two hours of testimony before a British parliamentary commission on Wednesday.
Mr. Volcker, the 85-year-old statesman of American banking regulation, had been invited to address the commission, which is investigating a recent spate of British bank scandals. He said that if left to their own devices, banks would find ways to intertwine their trades for their own accounts with the retail businesses in potentially dangerous ways.
His statements came as United States authorities move closer to enacting the so-called Volcker Rule, which would restrict the ability of banks, whose deposits are federally insured, from trading for their own benefit.
Banks and other Wall Street firms have fiercely opposed the proposed legislation, and have lobbied hard to alter how it would be put in place.
When asked by British politicians whether those changes have watered down the measure’s effectiveness, Mr. Volcker dismissed the concerns.
“I don’t believe that the thrust of it has been chipped away,” Mr. Volcker said on Wednesday.
British regulators have proposed similar rules that would cordon off firms’ retail operations from their riskier investment banking units. Mr. Volcker expressed doubt that such a system would work, as firms would continue to look for ways to combine their different operations in an effort to reduce cost and increase profitability.
The division between banks’ businesses “tends to break down over time because of pressures from the institution itself,” he said. “If you want to keep them separate, you should put them in two different organizations.”
Mr. Volcker also raised doubts over the benefit of complicated trading activities, which contributed to the global financial crisis.
London has been hit with scandals that have put banks’ riskier operations back in the spotlight. The British bank Barclays, for example, agreed to a $450 million settlement with authorities in June connected to the manipulation of crucial interest rates by some of its traders. Losses connected to bungled trades at JPMorgan Chase’s London office also now total billions of dollars.
The commission that heard Mr. Volcker’s testimony is expected to hear from other prominent finance officials, including Martin Wheatley, the chief British regulator, and Martin Taylor, a former Barclays chief executive.
On Wednesday, Andrew Tyrie, the British politician leading the parliamentary panel, joked that Mr. Volcker could be in London to discuss taking over as the new governor of the Bank of England, the country’s central bank. Mervyn A. King, the current governor, will step down from his post next year.
Mr. Volcker, who was chairman of the Federal Reserve from 1979 to 1987, smiled at the remark, saying that he was too old to become the Bank of England’s new chief.
“It’s a job for someone younger than 85,” he said.
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