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December 4, 2013

Volcker vote set for December 10

US regulators on Tuesday said they plan to meet next week to vote on the long-awaited Volcker rule, which sceptics believed would not get done by the end of the year deadline.

The Federal Reserve, the Commodity Futures Trading Commission, and the Federal Deposit Insurance Corporation are among the regulators that will meet on December 10 to consider the rule aimed at banning banks from trading from their own accounts. The Financial Times reported last week that regulators were expected to vote on that date.

The Volcker measure is a hallmark of the Dodd-Frank financial reform legislation of 2010 and is one of the most feared regulations by the banks. The rule took a few years to finalise, mainly because of disagreements among the five agencies, including the Securities and Exchange Commission and the Office of the Comptroller of the Currency, involved in writing the proposal.

That was because the rule must prohibit risky proprietary trading. But at the same time, it must also allow for legitimate banking activities, such as market making and hedging, which are difficult to distinguish from proprietary trading.”

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But big bank critics like Jeff Merkley, a Democratic senator, as well as consumer advocacy groups, pushed hard for the rule. Jack Lew, the Treasury secretary, pressured regulators to get it done by the end of the year.

“The Volcker rule is an essential measure to stop large, too-big-to-fail [groups] from making huge, highly-leveraged, swing-for-the-fences bets to inflate their bonuses, while shifting the risk of catastrophic loss to the public,” Dennis Kelleher, chief executive of consumer group Better Markets, said in a letter to regulators in November.”

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Read full Financial Times article here

 
 
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