New amendments to pending Volcker rules may postpone implementation
A number of officials in two key agencies taked with penning the Volcker rule are now insisting an amendment to the rules. The Volcker rule bans US banks from trading for their own accounts.
Commodity Futures Trading Commission Chairman Gary Gensler and Securities and Exchange Commission member Kara Stein are seeking to impose more stringent rules for banks to classify trading for their own accounts as legitimate hedging activity. The said amendments were confirmed by three people familiar with the matter. The disputed provision may prevent the five agencies drafting the rules to meet the deadline for its completion as mandated by the White House.
Gensler and Stein both seek to avoid a repetition of the London Whale trades at JPMorgan Chase, which under the drafted rules can still be repeated. The said trading scandal had cost the bank more than USD6.2 billion according to the anonymous sources as the deliberations have not been made public. Under the current rules, the bank can claim the losing derivatives would be permitted exemption under the term 'portfolio hedges.'