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Volcker Rule Is a Step Toward a Safer Financial System

Dec. 10, 2013

Volcker Rule Is a Step Toward a Safer Financial System

Citizen Input Helped Strengthen Rule

WASHINGTON, D.C. – After months of unnecessary delay, financial regulators today voted to finalize the Volcker rule, a key provision required by the Dodd-Frank Wall Street Reform and Consumer Protection Act. Public Citizen commends them for completing the rule.

The Volcker rule bars banks from engaging in proprietary trading – speculative trading purely for their own benefit instead of on behalf of their customers. Proprietary trading is often high-risk and can result in large losses, which in turn can expose banks to material financial distress.

“Public Citizen’s members and supporters have sent more than 15,000 of the approximately 18,000 total comments that regulators have received. They should be pleased that the final rule is considerably stronger than what regulators initially proposed,” said Micah Hauptman, financial policy counsel for Public Citizen’s Congress Watch division. “We consider that a victory for citizen input.”

While there are many positive aspects of the final rule – and Public Citizen believes it is a step forward toward a safer financial system – there still could be too many opportunities for banks to disguise as permitted activity what should be deemed prohibited propriety trading. And while a reasonable phase-in period for compliance is needed, delaying implementation to July 2015 is excessive.

The centerpiece of the rule appears to be its compliance framework. Accordingly, there are many opportunities for vigorous implementation, oversight and enforcement of the rule, and Public Citizen urges regulators to seize those opportunities.

“However, if regulators don’t in practice deploy this Volcker rule to change the casino culture on Wall Street and protect American taxpayers, then Congress should stand alert. The strongest protection for consumers, taxpayers and the financial system will come with the passage of the complete separation of commercial and investment banking through the 21st Century Glass-Steagall Act,” said Bart Naylor, financial policy advocate for Public Citizen’s Congress Watch division.

Public Citizen has issued the following reports on the Volcker rule:

Business as Usual: 99.9 Percent of Banks Would Not Be Affected by Volcker Rule

Industry’s Messengers: Congressional Recipients of Contributions from the Financial Services Sector Swamp Agencies with Requests to Weaken the Volcker Rule