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While the Volcker Rule has been in the works since 2009, the final rule is new to professionals at both banks and regulatory agencies. Everyone involved faces a steep learning curve.
October 7 -
Banks have never before had to establish policies and procedures at the granular level required under the new Volcker Rule. Doing so in a timely manner will be a challenge for most banks. For some, it will be impossible.
October 16 -
The Volcker Rule's data-intensive requirements are creating headaches for banks that still rely on manual processes and use multiple, disparate systems for securities and different derivatives trading.
October 23 -
Banks are hiring armies of lawyers, accountants, compliance consultants and IT vendors as they prepare to comply with the Volcker Rule. Ironically, their attempts to fortify themselves with outsourced knowledge could expose them to more operational risk.
November 4 -
Many foreign banks are confused about how the Volcker Rule applies to them and whether they are required to establish compliance programs for it in the first place.
November 12 -
A number of Dodd-Frank and Basel III regulations will impact banks' investments in the CLO market, but the Volcker Rule poses unique challenges.
November 18 -
Almost a year after the Volcker Rule was finalized, banks still have questions about which regulators are taking the lead on the rule and how the supervisory and enforcement process will work.
December 4
This is the first article in an eight-part series.
In 1991, I had the privilege of serving as a Russian interpreter for Paul Volcker, Henry Kissinger and Russia's foreign secretary at a Federal Reserve dinner hosting Boris Yeltsin, the then-president of the Republic of Russia. As a new member of the Federal Reserve Bank of New York's foreign exchange group, it was the first opportunity that I had to witness Volcker's incredibly brilliant mind at work.
Nearly two decades later, in 2009, Volcker proposed that banks be banned from proprietary trading and investments in hedge funds and equity. I was not surprised that it was he who would propose a way to protect U.S. taxpayers from the excesses of Wall Street. But I doubt that even Volcker could have envisioned how politicians, bank lobbyists, and regulators would turn his good intentions into one of the most complex regulatory
After a series of Congressional hearings on the Volcker Rule earlier this year, I
Due to the size of their securities and derivatives transactions, the banks most affected by the Volcker Rule include Bank of America, Citigroup, Barclays, Credit Suisse, Deutsche Bank, Goldman Sachs, JPMorgan Chase and Morgan Stanley. The rule has already forced these banks to rethink their business strategies and to invest millions to create strong Volcker Rule compliance programs. The rule will undoubtedly require much more extensive documentation and regulatory reporting than the banks have ever been accustomed to.
Indeed, banks headquartered in the U.S. as well as foreign bank organizations will encounter significant hurdles in complying with this key Dodd-Frank requirement by the set deadlines: July 2015 for banks with over $25 billion in assets and December 2016 for banks under $25 billion.
Given big banks' problems monitoring their
Moreover, given banks' significant
In the following seven articles, I will share the findings that have led me to conclude that implementing the Volcker Rule is likely to be a fool's errand. The first four articles series will cover the challenges in implementing the Volcker rule arising from people, processes, technology and external events. The two articles thereafter will focus on how the Volcker Rule is impacting foreign bank organizations and the collateralized loan obligations market. The final article in the series will discuss regulators' ability and willingness to enforce and supervise such a complex rule. This series will reveal a disheartening verdict: despite Volcker's laudable goal, banks will not end up doing much to sufficiently reduce their risks and protect U.S. taxpayers. And all five regulators risk wasting a lot of time trying to enforce the unenforceable.
Mayra Rodríguez Valladares is managing principal at