Concerned about how the Volcker rule will affect buy-side financial institutions’ ability to effectively deal with financial records management and improve their data governance strategies, many different organizations have been critical of the regulation, which prevents banks from engaging in certain types of investments. As a result, some have contemplated filing a lawsuit in order to get portions of the law changed or removed entirely.
However, thanks to the moves made by regulators, the American Bankers Association recently announced that it will no longer pursue its attempts to litigate the issue in open court.
“After consulting with our membership and concluding our analysis of the impact of the regulators’ interim final rule, we have decided to dismiss our [lawsuit],” Frank Keating, CEO and president of the ABA, said in a prepared statement. “The interim final rule has allowed many banks to avoid taking hundreds of millions of dollars in unnecessary write-downs, and has helped to minimize the cost and compliance burden for those that are affected.”
Adjustments still need to be taken care of
He stipulated, however, that after consulting with banking representatives and executives that stand to be adversely affected by the Volcker rule, there remains several issues that still need to be addressed.
“We believe the best opportunity to pursue successful resolution of these issues is to constructively engage with the regulators without the chilling impediment of pending litigation, particularly in light of their recent public statements expressing a desire to address the Volcker rule’s unintended consequences,” said Keating.
He said that a perfect example of what can be done might best be represented by the Federal Reserve addressing collateralized loan obligations that the inter-agency said it would further examine.
U.S. Chamber of Commerce against rule
The U.S. Chamber of Commerce is another organization that’s less than thrilled with the Volcker rule. When the Federal Reserve, Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency and the Commodity Futures Trading Commission approved the rule in December, CEO David Hirschmann noted that it had the potential not only to affect businesses on Wall Street, but Main Street as well.
“Since it was first proposed, we have warned that the Volcker rule may harm the ability of businesses to raise the capital needed to grow and operate,” said Hirschmann, who heads the U.S. Chamber’s Center for Capital Markets Competitiveness office. “The Volcker rule may shut Main Street businesses out of some markets, raise the costs of capital, and place the United States at a competitive disadvantage in a global economy.”