Michel Barnier, the European Union’s financial services chief, said a proposed U.S. ban on proprietary trading is too far-reaching and its implementation must be coordinated globally.
The so-called Volcker rule, named for former Federal Reserve Chairman Paul Volcker, was included in the Dodd-Frank Act to restrict risky trading at banks that operate with federal guarantees. Central bankers and regulators from around the world have voiced concern that the rule, which would apply to the U.S. operations of foreign banks, may also extend to firms’ operations outside of the country.
“It is not acceptable that U.S. rules have such a wide effect on other nations and foreign capital markets without any international coordination,” Barnier said today in a speech at a conference in Washington. “National rules can have serious effects abroad. That is why I’m concerned about your proposed implementation” of the Volcker rule.
In scores of comment letters filed Feb. 13, the world’s largest banks demanded changes to the proposed ban on proprietary trading. They said the Volcker rule, which is scheduled to take effect in July, would increase risk, raise investor costs, hurt U.S. competitiveness and be vulnerable to legal challenge. G-20 leaders haven’t endorsed the rule, which exempts U.S. government debt but not non-U.S. government bonds.
Barnier said he is “concerned” the U.S. hasn’t implemented tougher capital rules for banks that were approved by international regulators in the Basel Committee on Banking Supervision in 2009. The measures, known as Basel 2.5, would force lenders to hold more reserves against assets they intend to trade on the markets, and against complex asset-backed securities.
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