Janet Yellen, the nominee for Federal Reserve chairman, said the Fed would take into account the public interest in any delay of the conformance period for the Volcker rule, which bans proprietary trading at banks.
“As it considers the merits of adopting a final rule, the board will also consider the public interest in granting an extension of the conformance period,” Yellen said in a Nov. 18 response to questions from Senator Michael Crapo of Idaho, the senior Republican on the Senate Banking Committee.
“We are striving to consider this rule before year-end in order to provide clarity and certainty to the affected members of the industry and to the public more broadly,” said Yellen, the Fed’s vice chairman.
Regulators at the Fed, Office of the Comptroller of the Currency, Securities and Exchange Commission, Commodity Futures Trading Commission and Federal Deposit Insurance Corp. are working to complete work on the Volcker rule, named for former Fed Chairman Paul Volcker. The rule is one of the most controversial pieces of the 2010 Dodd-Frank Act and one of the final unfinished provisions of its overhaul of financial regulation.
The measure is aimed at preventing banks that hold federally insured customer deposits from engaging in the kind of speculative trading with their own capital that could threaten their stability. Standard & Poor’s has estimated that the rule could sap combined profits at the eight largest U.S. banks by $2 billion to $10 billion a year, depending on its final language.
Banks have until July 21, 2014, to implement the Volcker rule, even though regulators are behind schedule. Industry representatives have been assured by regulators that that deadline will probably be extended, according to three people involved in the discussions.
A first draft of the rule was released in October 2011. While regulators must agree on the wording of the measure, the Fed has the authority to delay the date of compliance.
Yellen said the Fed can grant three extensions, each lasting no more than one year, beyond the current conformance date.