Wall Street banks will have two years to implement the so-called Volcker rule so long as they make a “good faith” effort to comply with the ban on proprietary trading, U.S. regulators said.
Banks will get the “full two-year period” provided by the Dodd-Frank financial overhaul law to “conform” their activities and investments, the Federal Reserve and four other U.S. agencies said in a statement today. The Fed has the authority to extend the period of compliance beyond July 21, 2014, the regulators said.
“A lot of sweating brows at big banks are a lot drier today,” said Karen Shaw Petrou, a managing partner at Federal Financial Analytics, a Washington research firm whose clients have included Wells Fargo & Co. (WFC) “The statement finally makes clear that they can’t be held accountable for compliance with a rule not yet released.”
The rule, named for its original champion, former Fed Chairman Paul Volcker, is one of the most contentious parts of the Dodd-Frank law that was drafted to help prevent another financial crisis. It’s intended to reduce the chances that banks will put depositors’ money at risk. Banks argue that it is so broad and poorly defined it will force them to leave business lines and could actually increase risks for their clients.