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SIFMA President & CEO Kenneth E. Bentsen, Jr. testified today before the House Financial Services Committee on the impact and unintended consequences of the Volcker Rule. A link to Bentsen's full written statement is available here.
In his testimony, Bentsen said that the concept behind the Volcker Rule "sounds straight forward," but added that "at the level where the regulation impacts real businesses and investors in the real economy, time and experience have shown that it is, in fact, exceedingly complex."
The lack of a mechanism for regulatory coordination remains a top concern for SIFMA's member firms. "The law tasked five different regulators, the Commodity Futures Trading Commission, Federal Reserve Board, Federal Deposit Insurance Corporation, Comptroller of the Currency and the Securities and Exchange Commission with writing the rule, but it did not task any one agency or the agencies collectively with the interpretation, examination, supervision or enforcement of final regulation," said Bentsen.
"[A] failure to have a clear, transparent and consistent approach to address and resolve regulatory issues will only increase costs and delay achievement of the regulatory goals," he added.
Bentsen expressed the need for "FSOC to exercise its authority to coordinate supervisory activities with respect to the Rule, as Congress provided for in the FSOC's enabling statute and in the statutory Volcker Rule itself," and called for additional Congressional oversight of the "coordination and consistent application" of the Rule.
The complexity of the Rule, the lack of regulatory coordination, and the potential for disparate regulatory treatment could restrict capital, reduce liquidity and "undermine activities beneficial to the economy such as market making and hedging," said Bentsen.
Bentsen warned, "There is no doubt that the final Volcker Rule, as it was intended, will bring about changes in our markets," adding that in SIFMA's preliminary assessment "the following markets/areas will be impacted: venture capital, normal corporate structures such as equity joint ventures and acquisition vehicles, municipal financing via tender option bonds, loan and other securitizations, asset-backed commercial paper, commercial loans and lending via CLOs, CDOs and the trading of foreign sovereign debt."
Bentsen concluded by pledging to continue "working with Congress, our regulators, and other market participants to ensure the implementation of the Volcker Rule is not disruptive to the capital markets and the job creators they support."
