WASHINGTON Banking regulators appeared on course Tuesday to vote on a final rule to ban proprietary trading at U.S. financial institutions ahead of a year-end deadline.
More than two years since the initial proposal was released by regulators in October 2011, the Commodity Futures Trading Commission, the Federal Reserve Board and the Federal Deposit Insurance Corp. all announced plans to hold public board meetings on Dec. 10 to discuss and vote on a final Volcker Rule.
The five agencies responsible for drafting the regulation aimed at stopping commercial banks from taking risky bets with taxpayers' funds have been under immense pressure by the Obama administration to wrap up a lengthy and often frustrating rule writing process.
Treasury Secretary Jack Lew, who presides over the Financial Stability Oversight Council, and has often acted as an interlocutor among the agencies in reaching agreement on the controversial provision, imposed a Dec. 31 deadline earlier this year for regulators to complete the rule.
"We have to get this done, and when we get it done, our goal is not to be as tough as possible, or as lenient as possible," said Lew in an interview with CNBC on Nov. 12. "It's to get as close to right as possible .Inevitably, we might err a little, in one way or the other. If I had to choose, I would err on just being a little bit on the tough side."
The Volcker Rule has proven to be one of the financial reform law's most challenging provisions to implement, in part because it involves 22 people who must vote on the rule.
The Fed, FDIC, CFTC, the Office of the Comptroller of the Currency and the Securities and Exchange Commission have had to work together in bridging differences among their various missions and multitude of views into a coherent rule.
At times over the course of the past two years, the agencies have appeared close to the final finish, only to be drawn back to the debating table by either the SEC or CFTC.
Comptroller Thomas Curry, who is a member of the FDIC Board, is expected to review the final rule before casting his vote at the public meeting next week.
Speaking to reporters on Tuesday, SEC Chairman Mary Jo White said she expects the agency to consider the Volcker Rule on or around Dec. 10.
Regulators have faced the challenge of defining proprietary trading in a matter that would be consistent with the law's intent while still addressing ambiguities and unintended consequences. Progress at times has also been derailed due to intervening events like JPMorgan Chase & Co.'s $6.2 billion trading loss spurring increased scrutiny of the drafting of the law.
Last month, Fed Gov. Daniel Tarullo said JPMorgan's "London Whale" episode had been a "real-world case" that gave regulators a chance to road test the Volcker Rule.
"One of the key mandates to the staff from all the five agencies working on the final rule has been to ensure that London Whale, in a substantive and procedural terms, couldn't happen," said Tarullo, during a question-and-answer session at a shadow banking conference hosted by the Americans for Financial Reform.
While U.S. regulators have kept tightly lipped about how they will proceed, the agencies are expected to strengthen the provision to avoid such multi-billion trading losses, while also offering greater flexibility to allow banks to engage in market making activities.