by Staff Writer on January 31, 2012
Financial reform might just be reforming finance.
Citigroup is shuttering its proprietary trading desk — a unit that makes bets with the firm’s own money — before a provision banning the practice, with some exemptions, even goes into effect, Bloomberg andThe New York Times report. Most of the unit’s employees will also be leaving the firm. Citi executives said on a call last week that the unit is responsible in part for the $1.3 billion revenue loss in the firm’s equity trading unit last year.
The decision to close the desk comes as lawmakers continue to work on and refine the Volcker rule, a hotly-debated provision of the Dodd-Frank financial reform legislation that aims to ban certain types of proprietary trading. The rule, which was initially proposed as a 10-page document by former Federal Reserve Chairman Paul Volcker, has swelled to a piece of legislation nearly 30 times that length that even Volcker has said is “more complicated” than he would like.
Yet in spite of criticism that the rule now has too many loopholes to be effective, Citi isn’t the first bank to react preemptively to possible losses from the Volcker Rule. Goldman Sachs has closed two proprietary trading desks already, according to Reuters.
Jillian Berman, Huffington Post, January 30, 2012