Dec 9 The final version of the Volcker rule to
ban banks from gambling with their own money is "significantly
different" from the originally proposed version, making its
impact on the markets difficult to gauge, a top U.S. securities
regulator said on Monday.
Regulators will release the long-awaited final version of
the Volcker rule on Tuesday, following two years of consultation
over a rule which Wall Street sees as one of the harshest
elements of the post-financial crisis crackdown.
"The proposal that went out over two years ago was largely
just a series of questions," U.S. Securities and Exchange
Commission Republican member Daniel Gallagher told reporters on
the sidelines of an event sponsored by the American Chamber of
Commerce in Germany, held in Frankfurt.
"The final rule-making that you'll see is, I think,
significantly different than that proposal, such that it should
have been re-proposed so that the public could comment and tell
us whether we were getting it right."
Three of the five regulators involved - the Federal Reserve,
the Federal Deposit Insurance Corp and the Commodity Futures
Trading Commission - are slated to vote on the final rule at
The Office of the Comptroller of the Currency and the SEC
will not conduct public meetings. At the SEC, the five
commissioners are voting on paper ballots behind closed doors
and will release the vote and public statements on Tuesday
Gallagher told reporters he had already cast his vote, but
declined to say how he voted. Both he and his Republican SEC
colleague Michael Piwowar are widely expected to dissent.
The Volcker rule, required by the 2010 Dodd-Frank Wall
Street reform law, would force banks to curb their proprietary
trading and significantly scale back their investments in hedge
funds and private equity funds.
The measure has proven to be a lightning rod for
controversy, with banks fearing it will erode their profits and
stifle their ability to hedge market risks and engage in
legitimate trading activities like market-making.
Gallagher has been among the vocal critics of the Volcker
rule, saying the proposal was flawed and could not be adopted in
its current form.
Gallagher's comments are likely to help fuel Wall Street's
desire to challenge the rule in court after it is released.
Federal laws that govern rulemaking in the U.S. require
regulators to re-propose a rule and collect fresh public
comments if a final version differs drastically from the one
that was first proposed.
Gallagher raised this concern, saying: "My strong guess is
that the Volcker rule will be revisited." He did not elaborate
on what such a review would look like.