Paul Volcker, a former head of the U.S. Federal Reserve Board, Paul Volcker, said Wednesday that he expects the United States will pass financial industry regulatory reform within the next couple of weeks, and that this could help drive global reform, too.
Speaking at the annual conference of the International Organization of Securities Commissions in Montreal, Volcker, who is now an advisor to U.S. president Obama’s economic team, said that the push for regulatory reform in the U.S. financial industry should finally be realized in the near future.
Late last year, the U.S. House of Representatives passed its version of reform, and earlier this year, the U.S. Senate did the same. Now those two bills have to be reconciled into a single bill and approved by the president.
Perhaps the biggest area of dispute, Volcker said, is the question of to what extent derivatives such as credit default swaps should be pushed through clearing houses and onto exchanges. While there is some intellectual consensus on the value of pushing derivatives onto exchanges, Volcker noted that reaching a consensus on the practicality of doing this is proving harder to come by.
Additionally, Volcker hinted that his proposal, known as the so-called “Volcker Rule”, that aims to separate core banking activities from speculative activity such as proprietary trading, running hedge funds and private equity shops, will likely be part of the final legislation. In his remarks to the IOSCO conference, Volcker suggested that U.S. legislators are coming around to the view that banking activities are special, and do provide an important function that governments have an interest in protecting, but that they should not also implicitly back speculative activity.
He noted that one area the reform doesn’t deal with adequately, in his view, is the role of credit rating agencies. This may be a challenge for the future he said, as there is no clear consensus on the issue.
Volcker also said that if U.S. reform is passed in the very near future, as he expects, the U.S. will be the first major jurisdiction to do so. And, he suggested that this may serve as a rallying point for other major jurisdictions that are also contemplating reform, such as the UK and Europe.
Indeed, he said that he’s now hopeful for the first time that there will be some similar global reform, which will defuse complaints from financial firms that the playing field is being tilted unfairly against them when their country adopts regulatory reform that isn’t being imposed in other countries.
U.S. financial reform package expected to pass shortly, Volcker says
U.S. reform could serve as a rallying point for other jurisdictions
- By: James Langton
- June 10, 2010 June 10, 2010
- 07:32