IIB Letter on Alternatives to the Volcker Rule

In this letter to House Financial Services Committee Chairman Spencer Bachus, the IIB expressed its support of legislative alternatives to the Volcker Rule (Dodd-Frank Section 619). While expressing support for certain financial reforms ("increased transparency; stronger capital and liquidity standards; and reduced risk to financial stability and to the taxpayer"), the IIB asserted that the U.S. and global economies would be damaged should the Volcker Rule be implemented.

Lofchie Comment: The letter from IIB follows a recent letter from SIFMA which also asks that Volcker be revisited. Hopefully, this indicates that we may be moving into a period when we can have a more open discussion of the benefits and the costs of the new regulation.Beyond the general complaints as to the Volcker Rule, the letter also points out a number of areas where the Volcker Rule seems over-reaching as to its regulation of non-U.S. firms, or is blatantly discriminatory against non-U.S. interests or entities in ways that are impossible to justify, such as the favorable treatment given US government securities as opposed to securities of other governments, and the favorable treatment given to U.S. mutual funds as compared to funds organized in other countries. While I may be particularly stubborn in my refusal to concede to the inevitability of Dodd-Frank, I cannot believe that the United States will be able to enforce a statute that asserts such authority over non-U.S. financial institutions while creating such an unlevel playing field for them--at least without precipitating discriminatory responses from other governments. (I do note that, while Dodd-Frank is in numerous respects unfair to non-U.S. financial institutions, in other respects, it will very substantially handicap U.S. institutions, particularly U.S. banks doing business outside the United States, so it is hard to tell whose interests it will damage more.)To see some of the criticism of non-US financial regulators for Dodd-Frank, go to the tabs on the left and select "Since 1 Month Ago" and "Cross Border."

View letter here (links externally to IIB website).