Volcker Rule Conflict Provisions Not ‘Tough Enough,’ Levin Says
Nov. 8 (Bloomberg) -- James Reynolds, chief executive officer of Loop Capital Markets LLC, talks about the Volcker rule and its potential impact on U.S. banks and capital markets. Reynolds, speaking with Betty Liu on Bloomberg Television's "In the Loop," also discusses the congressional supercommittee on deficit reduction. (Source: Bloomberg)
Volcker rule language aimed at limiting conflicts of interest between U.S. banks and their clients is “not nearly tough enough,” Senator Carl Levin said.
Levin, a Michigan Democrat who helped draft the Dodd-Frank Act ban on proprietary trading for deposit-taking banks, said today that provisions released by federal regulators last month calling for disclosures to “permit” clients to understand a divergence in interests don’t adequately address the problem.
“It’s not nearly tough enough for me,” Levin, the chairman of the Senate’s Permanent Subcommittee on Investigations, said at an Americans for Financial Reform conference in Washington. “It wouldn’t be sufficient to ‘permit’ -- it should be much stronger language than that.”
The proposed rule, named for former Federal Reserve Chairman Paul Volcker, was written by four regulatory agencies and is out for public comment. It would ban banks from making trades for their own accounts, allowing them to continue short- term trades for hedging or market-making. Lenders also would face limits on investments in private-equity and hedge funds.
The proposal also included language that bars banks from having interests that are “materially adverse” to the interests of clients or customers unless there is timely disclosure or effort to negate the conflict. Levin said he would prefer the client be required to explicitly acknowledge that they are aware a conflict exists.
To contact the reporter on this story: Phil Mattingly in Washington at pmattingly@bloomberg.net.
To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net
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