Many buy-side financial institution experts and business owners have chimed in about the Volcker Rule, the regulation that places restrictions on what banks can own or invest in. While some are in favor of the rule, most are opposed to it, saying that it will make compliance management more difficult. The latest person to subscribe to this belief is the current CEO of the Securities Industry and Financial Markets Association.
Ken Bentsen, who formerly served as a U.S. representative for Texas 25th Congressional District, stated in an opinion piece that the biggest problem with the Volcker Rule is that it’s complexity makes it too easy to be interpreted in one of many ways. And even though five federal agencies were tasked with coordinating the tenets of the regulation – including the Commodity Futures Trading Commission, Federal Deposit Insurance Corporation and the Comptroller of the Currency, among others – there’s little understanding about how it will be enforced.
“As it stands, there is still not a clear roadmap on how to implement and interpret the Volcker Rule,” said Bentsen, according to political news source The Hill. “There may be several, diverging compliance paths depending on which regulator you ask; and with no clear leader, who will make the final call?”
Compliance for one company many not be same for another
For example, Bentsen said that different regulatory agencies will likely make different decisions about how to enforce the rule depending on the organization that they’re dealing with, whether the OCC is interpreting the rule for a national bank, while the SEC handles it from a broker-dealer’s perspective.
“This lack of a clear, transparent and consistent approach to address and resolve regulatory issues will only increase costs, make compliance more challenging, delay achievement of the regulatory goals and exacerbate burdens that undermine activities beneficial to the economy,” Bentsen wrote.
The way to correct this issue, Bentsen advised, is by better identifying what the specific requirements of the Volcker Rule include so that they can be easily understood and applied equally. Ideally, the organization that should coordinate and facilitate these clarifications is the Financial Stability Oversight Council.
The U.S. Chamber of Commerce and the American Bankers Association are among the organizations that have been critical of the Volcker Rule. The ABA threatened to sue the government for its implementation, but ultimately decided to drop the litigation after regulators implemented an interim final rule that the ABA said would help banks avoid million-dollar losses.