13 February 2012

EBF/IIB: Joint notice of proposed rulemaking implementing the Volcker Rule

Comments focused on the cross-border issues and potential extraterritorial effects of particular interest to internationally-headquartered banks with US banking operations (international banks).

In the view of IIB and EBF, the Proposed Rule’s interpretation of the statutory exemptions for activities conducted “solely outside of the United States” is inconsistent with the plain language of the statute, congressional intent, the Volcker Rule’s policy objectives, and longstanding US policies limiting the extraterritorial scope of US banking law. The Proposed Rule would extend the scope of the Volcker Rule to a broad range of non-US trading and fund activities that Congress specifically intended to exclude from its scope.

This would create unintended negative effects inside and outside of the United States and inappropriately impose US regulation on the home-country and other non-US activities of international banks. It would have significant adverse and unintended consequences for the US economy, US investors and financial stability. The flow of capital from foreign investors to US companies would be restricted, and liquidity in US markets would be reduced, without any corresponding benefit to US financial stability or the safety and soundness of US banks.

IIB and EBF urge the Agencies:

• to reconsider their proposed approach to the extraterritorial application of the Volcker Rule, and to adopt an approach based on the plain language and core policy objectives of the Volcker Rule—namely, to reduce risks to US taxpayers and US financial stability.
• to issue a new proposed rule after considering comments on this proposal, and to revise the conformance rules to provide adequate time after issuance of a Final Rule for banks to conform their activities in an orderly manner, minimising negative impacts on customers, the markets and banking entities.

Full notice

© EBF