A group of Democratic Senators recently urged financial regulators to provide more transparency about how the Volcker Rule is currently being enforced.
The Volcker Rule, established as part of the Dodd-Frank bill, requires a separation of hedge fund-like activities from traditional banking.
In June, the Federal Reserve Board proposed changes to simplify the rule, eliminating or modify requirements it deemed not necessary to implement the statute effectively. The changes were developed and approved by the five agencies that oversee it — the Federal Reserve Board, the Commodity Futures Trading Commission, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Securities and Exchange Commission. The proposal is currently open for public comment.
Specifically, the proposed changes would tailor the rule’s compliance requirements based on the size of a firm’s trading assets and liabilities, among other modifications.
In a letter to the federal regulators, Sens. Jeff Merkley (D-OR), Sherrod Brown (D-OH), and Elizabeth Warren (D-MA) asked for information on how it is being enforced given the attempts to simplify or “weaken” the rule.
“We respectfully but urgently request that you share with Congress quantitative data and metrics demonstrating banks’ activities under the Volcker Rule, along with the agencies’ standards used to demonstrate compliance, the penalties for non-compliance, and banks’ success or failure at achieving compliance,” the senators wrote. “This should include the seven factors that banks are required to report to the agencies for each trading desk, along with a description of how frequently examiners at the agencies have used the quantitative metrics to date, including how metrics are used to evaluate compliance with the Volcker Rule,” the Senators wrote.
They said this information and data should be made publicly available before the end of the comment period.
“Congress intended for the Volcker Rule to function as a modern-day Glass-Steagall Act, acting as a firewall to safeguard traditional loan-making and deposit-taking at banks from high-risk bets that put customers and the financial system at risk. Congress and the public deserve to be able to evaluate it,” the senators concluded.