Banks will be expected to fully comply with the provision, named after former Fed Chairman
It was a long-awaited reprieve for firms that feared having to adhere to the rule this year at the stroke of midnight on
"This should reassure the market that banks will continue to engage in market-making even after Volcker Rule kicks in
The rule, which bars banks from proprietary trading activities and hedge fund and private equity funds activities, has been a source of concern for a number of stakeholders given the complexity of the proposal released by the agencies last year. The regulators have yet to finalize the plan, but banks had begun wondering when they are expected to comply with the statute.
According to regulators, firms have two years to prepare, but are encouraged to take steps toward that effort in the meantime.
"During the conformance period, banking entities should engage in good-faith planning efforts, appropriate for their activities and investments, to enable them to conform their activities and investments to the requirements of section 619 and final implementation rules by no later than the end of the conformance period," according to the statement.
But bankers were still wary Thursday on how they would take steps to conform to a rule that had yet to be completed.
"The purpose of the two-year period is to bring our operations into conformance. If we don't know what the rule is, we can't start that," said
Others agreed suggesting more clarity would be necessary in order for institutions to become compliant.
"All that we know is that at the end of this two-year period in
Some observers said regulators had to keep the status quo until the rule, which will ultimately dictate whether banks will be in the market-making businesses, has been completed.
"It was the only choice," said Seiberg. "The fact is it's hard to see how they could have gone in a different direction because the rule isn't finalized and there's lots of potential downside risk to the economy if banks en masse pull out of market making. So until you know what the final rule is going to be, you want to preserve the status quo."
Under the Dodd-Frank law, the statute takes effect on
"The Board received a number of requests for clarification of the manner in which this conformance period would apply and how the prohibitions will be enforced," according to a joint statement with the four other regulators responsible for drafting the rule. "The Board is issuing this statement to address this question."
|Copyright:||(c) 2012 Financial Planning. All rights Reserved.|
|Source:||Source Media, Inc.|