U.S. financial regulators should “re-propose” the so-called Volcker Rule that bans banks from engaging in proprietary trading, Securities and Exchange Commission member Troy Paredes said.
“At this point, the most prudent path forward would be a re-proposal,” Paredes, one of two Republicans on the five-member commission, said at a conference in Washington sponsored by the Council of Institutional Investors. “We run the risk that when we solve one problem we create many other problems and other unintended consequences.”
The SEC, along with the Federal Reserve, Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency released a 298-page proposal in October to implement the proprietary trading ban, which was a part of the 2010 financial regulatory overhaul.
The proposal includes exemptions that would allow banks to conduct proprietary trading that is tied to market-making activities or hedging risk. Those exemptions have been criticized for adding complexity that would make implementing the ban difficult.
Former FDIC Chairman Sheila Bair has told lawmakers that the Volcker Rule is so complicated that regulators should consider starting over.
The Dodd-Frank Act calls on regulators to finalize the Volcker Rule by July 21, a deadline that Fed Chairman Ben S. Bernanke has told Congress is unlikely to be met. A bipartisan group of six senators introduced legislation in March that would align the deadline with regulators’ completion of detailed rules for the proprietary trading ban.
Representative Barney Frank of Massachusetts, co-author of the Dodd-Frank Act, issued a statement last month urging regulators to release a simplified version of the proprietary trading ban by Sept. 3.