Wall Street's long campaign to eliminate the tougher trade restriction imposed on banks after the financial crisis is finally paying off under President Donald Trump.
The Federal Reserve Board now led by those appointed by Trump, on Wednesday took the most concrete step to undo the Volcker Rule, which was key to Washington's efforts to make the industry safer after the collapse of 2008. Fed governors voted 3-0 to seek comment on the proposed changes, beginning an administrative process aimed at significantly reducing compliance costs for financial firms such as Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co.  New Volcker Rule Prep Regulators. Traders Salivate: QuickTake
The rule aims to prevent banks with deposit insurance with federal support from suffering considerable losses by restricting their ability to bet with their own capital. Financial firms have said that the rule is unnecessarily complex and almost impossible to comply with.
Regulators appointed by Trump have shown a greater willingness to listen to such complaints, and propose a modernization that would give banks more room to presume that their operations comply with the rule.
"The objective of this proposal is simple: to simplify and adapt the Volcker Rule in light of our experience with the rule in practice," said Randal Quarles, the Fed man in banking regulation . "This is a shared goal among the five agencies and among the legislators of those agencies with different backgrounds."
Reviews are not just a setback, said Quarles, calling them "fruit of a long and shared experience" and not "badumptions of a few recently named individuals."
Over the next week, agencies such as the Securities and Exchange Commission and Federal Deposit Insurance Corp. will join the Federal Reserve to propose the changes. The proposal will be published for public comment, after which the regulators must submit it to a final vote before the changes can take effect.
The rule, so named by former Fed Chairman Paul Volcker, banned what is known as property negotiation the practice of banks investing for their own benefit instead of buying or selling securities to satisfy the customer requests. It also restricted the ability of lenders to invest in hedge funds and private equity firms.
The changes would "simplify and generally adapt" the regulation without negatively affecting the safety of the banks, according to a summary of the plan.
The proposal would eliminate the badumption that the positions held by the lenders for less than 60 days are their own operations. And it would eliminate a part of the test to determine if an operation is exclusively owned, replacing it with new criteria based on how the bank accounts for the transactions, according to the summary.
The plan also establishes a tiered system for compliance based on the badets and liabilities of a bank's negotiation, with the strictest requirements that apply to companies with $ 10 billion or more, according to the summary.
Regulators also propose that it be easier to take advantage of exemptions, such as granting ample flexibility to execute operations that serve as a hedge against possible losses. Banks now have to present documentation to prove that they are covered, requirements that they consider unreasonable.
The proposal expands the exemptions banks may request to subscribe and market to allow activities "designed not to exceed the demand of short-term customers reasonably expected". In a key change from the current rule, the proposal will allow banks to establish their own risk limits for market creation and underwriting activity.
Also seeks to alleviate the impact of the rule on the operations of foreign banks outside the US
Fed Governor Lael Brainard, who worked in the Treasury Department During the Obama administration when the Volcker Rule was created as part of the Dodd-Frank Act, he said he supported the changes, the proposal, he said, will ensure that the "core" of regulation, which prohibits banks from speculative trading, is maintained.
"While the purpose of the Volcker Rule is convincing, our experience with its implementation in the past Some years suggest that the interinstitutional rule proved inn necessarily cumbersome in practice, "he said in remarks prepared for the board of the Fed to consider proposing the changes.
Liberal groups called the Fed plan a dangerous gift for Wall Street could fuel the next financial crisis.
"This proposal is not a minor set of technical adjustments to the Volcker Rule, but an attempt to unravel the fundamental elements of the response to the 2008 financial crisis, when banks financed their bets with insured depositors," said Marcus Stanley, director of policy at Americans for Financial Reform.
Volcker & # 39; s View
Volcker himself intervened, saying he appreciates the efforts to simplify If we comply with the rule that credits him having defended as an adviser to the then President Barack Obama.
"What is critical is that simplification does not undermine the central principle at stake: that banking groups backed by taxpayers, of any size, do not participate in proprietary transactions in disagreement with the basic public and the interests of customers, "Volcker said in a statement. "I trust that the final rule will keep that position strong, facilitating its practical application."
Although the banks are likely to accept the changes, the renewal is not expected to result in a return of the negotiation on its own or that the immediate lenders rehire some of the high-flying operators who fled in search of hedge funds after the financial crisis. The total derogation of Volcker is considered improbable, because it would require an act of Congress.
Regulators generally give the public months to weigh their proposals to revise the rules, and then hold a second round. of votes to make binding changes.
Quarles, the vice president of supervision of the Fed, said the plan was a "best, first effort" to simplify the rule, indicating that more adjustments may be coming.
"I see this proposal as an important milestone in the complete reform of the Volcker Rule, but not the completion of our work," said Quarles.
– With the badistance of Yalman Onaran