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Bloomberg
Goldman Sachs Group Inc. has been brawling with regulators over the Volcker Rule for years. And it’s still fighting even though officials appointed by President Donald Trump are now working to soften the landmark constraint on banks.
Goldman said a revamp that regulators proposed earlier this year falls far short of what’s needed to ease undue burdens on Wall Street. Among the gripes it laid out in an October 17 letter to federal agencies: the overhaul might make it even harder for banks to trade and it remains too restrictive in curtailing lenders’ investments in hedge funds and private-equity firms.
A key response by lawmakers to the 2008 financial crisis, the Volcker Rule was included in the Dodd-Frank Act as a way to reduce risk-taking by banning banks from making market bets with their own capital.
Wall Street complained ever before the regulation’s 2013 implementation that it’s unnecessarily complex, almost impossible to adhere to and that it prevents banks from executing appropriate trades for clients. Trump-picked regulators, who are receptive to those concerns, proposed a revised version in May. The deadline for submitting responses passed last week. Goldman said it contributed to comments written by five different bank trade groups. But unlike competitors, including Morgan Stanley, JPMorgan Chase & Co. and Citigroup Inc., Goldman also wrote its own letter. One explanation for Goldman’s special interest in seeing the Volcker Rule lose some of its bite: the firm’s outsize focus on trading.
One of banks’ biggest grievances about the original Volcker Rule is that trades held for fewer than 60 days are presumed to violate the regulation. Regulators tried to fix things earlier this year by proposing that the 60-day test be replaced with a new standard linked to accounting rules.
Specifically, banks would be barred from trading anything that fits within an accounting category that ties the value of securities to market prices. Goldman joined the broader industry in ripping the plan, calling it “highly problematic†because it risks roping in a lot more transactions than are covered by the existing Volcker Rule.