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New regulatory group forms to help implement Volcker Rule

In front of the House Financial Services Committee, an assembly of U.S. regulators recently testified to inform them of the details regarding the formation of an interagency group that will help coordinate the implementation of the Volcker Rule, which officially went into effect this past December.

Representatives from the Federal Reserve, Federal Deposit Insurance Corporation, U.S. Commodity Futures Trading Commission, Securities and Exchange Commission, as well as the Comptroller of the Currency, were all represented and will form the basis of the group.

Mary Jo White, chairman of the U.S. Security and Exchange Commission, testified on behalf of the interagency team, which she said is vital to the appropriate governing of the rule that prohibits banks from forming certain investments or making speculative bets, among other regulations.

“This interagency group will be instrumental in coordinating the agencies’ interpretations and implementation of the final rule on an ongoing basis,” said White.

Rule remains somewhat controversial
Though the legislation is meant to serve as a guard against another financial crisis, it’s been roundly criticized by many business owners and lawmakers, believing it could be a hindrance to the free marketplace and economic growth.

Daniel Tarullo, member of the Board of Governors for the Federal Reserve, told the committee that some of the reforms made to the rule should make it easier to work with, particularly as it relates to data governance.

“I think the text is an improvement, both normatively and technically, on the proposed rule issued in October 2011,” said Tarullo. “The basic approach of the final rule is generally consistent with that adopted in the proposed rule, but the many comments we received from a variety of perspectives, including from members of Congress, helped us make useful changes and clarifications throughout the final rule.”

He added that the implementation of the Volcker Rule will help guide what changes, if any, need to be made over time. Relevant data will be collected from large banking organizations and the information that’s gathered will serve as a good reference point in which to determine whether further clarity or relaxing of the rule is warranted.

According to testimony from CFTC acting chairman Mark Wetjen, Volcker regulations give it the authority of more than 100 registered swap dealers and futures commission merchants that align with the definition of “banking entity.”

Financial experts have told Forbes magazine that banks need to be ready to improve their financial records management, as market participants could incur sanctions by not having the right information in place.

“Banks, quite simply, need to record and collect everything,” said independent financial analyst Ralph Silva. “They need to report on the data, from more sources, and keep it longer than before.”

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