WASHINGTON — Sens. Jeff Merkley and Carl Levin on Thursday urged regulators not to delay writing a strong rule that would ban banks from proprietary trading.
The two senators, who were initial sponsors of the provision, sent a letter to Federal Reserve Board Chairman Ben Bernanke and all four other regulators urging that the so-called 'Volcker Rule' not be delayed or scrapped ahead of the July 21st deadline.
"We urge you to fully implement a clear, strong, and effective Volcker Rule without delay," the senators wrote along with 22 other supporters in their letter. "This rule should be finalized this summer."
Regulators led by Bernanke have already suggested that a final rule may not be completed by the deadline set by Congress in the Dodd-Frank Act.
Last week, responding to industry complaints, regulators issued clear guidance on when institutions would have to begin complying with the rule named after former Fed Chairman Paul Volcker. Banks will have until July 21, 2014, or two years after the rule technically takes effect.
It was a point that the senators stressed in their letter to regulators arguing institutions have had ample time to bring their businesses slowly into compliance — and could potentially have more in the future.
"The banks that will be directly impacted by the Volcker Rule have already had nearly two years to realign their businesses to comply with the broad contours of the rule, and many have already taken steps to do so," they wrote. "The statute itself provides for an additional two years — extendable up to five years — for financial firms to come into compliance with the Volcker Rule."
The rule, which bars banks from proprietary trading activities and hedge fund and private equity funds activities, has been a source of concern for a number of banks given the complexity of the proposal released by the agencies last year.
In light of public criticism, senators sought to make the case for the necessity for keeping the Volcker Rule in order to protect the financial system and U.S. taxpayers.
"U.S. capital markets will be the stronger under the Volcker Rule,"they wrote. "With fewer conflicts of interest and more reliable market-makers, our markets will be healthy and vibrant, just as they were when the Glass-Steagall Act protected our financial system. But we need you to fulfill the statutory mandate."
They also included in the letter a list of specific concerns they hoped regulators would be able to address in the final rule, including eliminating loopholes, strengthening CEO and board-level accountability and enhanced public disclosure.