US Banks Seek to Challenge Dodd-Frank Act's Volcker Rule

Some of the big US banks are reported to be gearing up for getting Congress to loosen or even eliminate one of Wall Street's most loathed Dodd-Frank provisions, the Volcker rule, against using depositors' funds for speculative bets on the bank's own account, as per a Bloomberg report today.

To unlock the Asian market, register now to the iFX EXPO in Hong Kong

Since the US election last November, industry lobbyists and legislative staff have congregated to discuss a rollback of Volcker, part of the Dodd-Frank financial reform that Congress enacted after the financial crisis and bank bailouts. The aim is to demonstrate how the Volcker rule is actually bad for companies, investors and the US economy on the whole.

Tough Stance

The Obama administration's regulators and enforcement agencies have been tough on banks, but they now see opportunities to unravel reforms under Donald Trump who earlier this year called for the scrapping of Dodd-Frank.

While an outright repeal of the Volcker rule is not expected, any small but meaningful changes could prove fruitful.

However, with a fresh bout of lobbying, watchdogs are reported to be worried about big banks reverting to a casino-like past and consider it dangerous to modify or repeal Volcker in isolation of a larger package of banking reforms.

Banks are nonetheless seeking to reverse language in the final Volcker rule that assumes all trades are proprietary unless banks can prove otherwise. They are also looking for clarification on language that instructs them to hold only enough securities to satisfy "reasonably expected near-term demand" from customers.

As bankers and lobbyists proceed to present their case that Volcker is reducing market Liquidity Liquidity The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent The term liquidity refers to the process, speed, and ease of which a given asset or security can be converted into cash. Notably, liquidity surmises a retention in market price, with the most liquid assets representing cash.The most liquid asset of all is cash itself.· In economics, liquidity is defined by how efficiently and quickly an asset can be converted into usable cash without materially affecting its market price. · Nothing is more liquid than cash, while other assets represent Read this Term, thereby hurting companies, investors and the economy, Tom Quaadman, Executive Vice President at the US Chamber of Commerce's Center for Capital Markets Competitiveness, commented: “Volcker needs to change so businesses can get started, grow, and create well-paying jobs."