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European Commission proposes Volcker Rule-like policy change

In the latest example of financial institutions operating under strict scrutiny from regulators, the European Commission has proposed a set of rules that experts in the industry say bears a striking resemblance to the Volcker Rule that’s in place in the United States.

On Jan. 28, the European Commission called for modernizing some of the data governance rules that were first established in 1995 in order to improve the protections of investors. At its core, the proposal would prevent European banks from taking part in proprietary trading.

The rule change would also strengthen the authority of regulators to punish organizations for violating the tenants of the mandate.

“National data protection authorities would also be given the power to fine companies that breach the rules,” the EC said in a press release. “Personal data gathered for the purposes of law enforcement would be better protected.”

The announcement comes after several polls have indicated more concern about data management. Approximately seven in 10 Europeans say that they can’t help but feel somewhat worried about how businesses use information that’s disclosed.

Proposal could save companies billions
The EC indicated that the rule change should ultimately be a boon for buy-side financial institutions. By helping to reduce administrative costs, it could wind up saving companies more than $2 billion on an annual basis.

Michel Barnier, commissioner for internal market and services for the EC, said that these reforms were sorely needed.

“Today’s proposals are the final cogs in the wheel to complete the regulatory overhaul of the European banking system,” said Barnier. “This legislation deals with the small number of very large banks which otherwise might still be too-big-to-fail, too-costly-to save, too-complex-to-resolve. The proposed measures will further strengthen financial stability and ensure taxpayers don’t end up paying for the mistakes of banks.”

He added that the changes strike a nice balance between ensuring business owners’ financial stability for investors and executives, as well as providing them with the opportunity for growth.

Since the announcement, executives within the banking and financial services industry have noted that it bears all the hallmarks of the Volcker Rule, a mandate that places trading restrictions on financial institutions, implemented in the wake of the Great Recession. The rule affects how companies perform their data management duties. It was a major component of the sweeping bill, known officially as the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, which brought significant changes to the financial industry.

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