Deutsche Bank AG was hit with the Federal Reserve’s first major fine for failing to ensure traders abide by the Volcker Rule’s ban on risky market bets — and will also pay even more for letting currency desks chat online with competitors, allegedly revealing positions.
The simultaneous sanctions, totaling almost $157 million, fault lax oversight of traders that persisted into last year. The company — which raised $8.5 billion from investors this month to recapitalize — admitted to the Fed in March 2016 that it still lacked adequate systems for keeping tabs on dealings that might run afoul of the Volcker ban.
“Significant gaps existed across key aspects of Deutsche Bank’s Volcker Rule compliance program,” the Fed said Thursday, fining the firm $19.7 million for the lapses. As for chats, the bank failed to detect that currency traders engaged in “unsafe and unsound conduct,” disclosing some positions or talking about coordinating strategies, the Fed said. The company will pay $136.9 million for that.
There would be no better use of President Donald Trump’s deregulatory zeal than to engineer a wholesale redesign of the crazy quilt of federal agencies that regulate Wall Street and the financial sector, former Fed Chairman Paul Volcker said Wednesday.
While everyone complains about the fragmented structure of regulatory agencies, there is enormous resistance to change, Volcker said in a speech to the Bretton Woods Committee meeting in Washington.
So far, some 50 efforts have been made since World War II to streamline the agencies but all have failed, he noted.
“My point here is to encourage the Congress and the new administration to launch together a serious study of how to deal with the shortcomings of a system which has simply outlived its rationale and its usefulness,” Volcker said.
“That indeed is a project worthy of a new administration interested not only in tweaking of oversight and regulatory procedures but rather in simplifying an archaic and unduly complicated regulatory system, a structure that is itself acting as an impediment to efficient and stable markets,” he said.
Bank of America (BAC) CEO Brain Moynihan believes it is the right time to introduce changes to the Volcker rule of the Dodd-Frank Act. Moynihan was speaking with Handelsblatt Global, a German language business newspaper published in Dusseldorf.
The Volcker rule is a federal regulation that keeps banks from conducting some investment activities using their own accounts. It also limits the banks’ ownership of and their relationships with hedge funds.
Federal Reserve Governor Jerome Powell urged Congress to rewrite the Volcker Rule that restricts proprietary trading, while urging “a high degree of vigilance” against the buildup of financial risks amid improving U.S. growth.
“What the current law and rule do is effectively force you to look into the mind and heart of every trader on every trade to see what the intent is,” Powell said Saturday at the American Finance Association meeting in Chicago. “Is it propriety trading or something else? If that is the test you set yourself, you are going to wind up with tremendous expense and burden.”
Powell’s comments compare to Fed Chair Janet Yellen, who has supported the sweeping bank rules of the 2010 Dodd-Frank Act in the wake of the global financial crisis. President-elect Donald Trump has vowed to dismantle Dodd-Frank. The Volcker Rule restricts banks with taxpayer-backed deposits from making certain types of speculative “proprietary” trades.
Big Wall Street banks are asking the U.S. Federal Reserve to grant them an additional five-year grace period to comply with a financial reform regulation known as the Volcker rule, people familiar with the matter said.
If the Fed agrees, the extension would give banks more time to exit fund investments that are difficult to sell, but no longer allowed by the law. The added grace period, which follows three one-year extensions, would start next year and run through 2022.
The law on Volcker rule implementation says banks can ask for an extra five-year extension for “illiquid” funds, where banks had contractual commitments to invest.
In deciding whether to grant Wall Street more leeway, the Fed has asked banks to provide details on their specific investments to prove that they fall under the statutory definition of “illiquid,” said the people, who requested anonymity to discuss non-public regulatory discussions.
Those seeking the extension include Goldman Sachs, Morgan Stanley,JPMorgan Chase and some other banks, the sources said. They are making their push in part through Wall Street lobbying group the Securities Industry and Financial Markets Association (SIFMA).
SEVEN years ago, the financial crisis sent our economy into a tailspin. Over five million people lost their homes. Nearly nine million lost their jobs. Nearly $13 trillion in household wealth was wiped out.
Under President Obama, our economy has come a long way back. Our businesses have created more than 13 million jobs. People’s savings are being restored. And we have tough new rules on the books, including the Dodd-Frank Act, that protect consumers and curb recklessness on Wall Street.
But not everyone sees that as a good thing. Republicans, both in Congress and on the campaign trail, are dead-set on rolling back critical financial protections.
Elizabeth Warren praise Clinton’s op-ed. Click here.
Law360, New York (March 11, 2015, 1:45 PM ET) — A top Republican lawmaker on Wednesday said that in order to get some regulatory relief passed, he may consider a change in strategy after a bill that would address 12 separate fixes to the Dodd-Frank Act was stymied in the Senate.
Rep. Mike Fitzpatrick, R-Pa., has introduced on two separate occasions a bill that would give banks an additional two years to dispose of collateralized loan obligations as required by the Volcker Rule, among 11 other provisions. Both times, the bill has passed through the U.S….
Veto this bill, President Obama!!!
WASHINGTON — House Republicans on Wednesday pushed through a bill that would delay a key section of the Volcker Rule, ignoring staunch opposition from Democrats and a veto threat from President Barack Obama.
The vote of 271-154 included just 29 Democratic supporters. Rep. Walter Jones (R-N.C.), a persistent opponent of Washington favors for big banks, was the lone Republican to stand against the bill.
“If at first you don’t succeed, try, try, again,” said Rep. Maxine Waters (D-Calif.) on the House floor the evening before the vote. “Usually we use that saying with children, to encourage them to achieve greater things, but it seems that when it comes to Congress, it’s what Wall Street keeps telling House Republicans.”
The legislation is a compilation of 11 bills that chip away at the 2010 Dodd-Frank financial reform law. All but one passed the House by wide margins in 2013 and 2014, but died in the Senate, where then-Majority Leader Harry Reid (D-Nev.) refused to put them on the floor for a vote. The most controversial measure in the collection is a two-year delay of a requirement that banks offload “collateralized loan obligations” — risky packages of corporate debt that are sliced off for sale to investors. Similar collections of risky mortgages were at the heart of the 2008 meltdown, and federal regulators have been warning about the corporate debt market overheating.
Big banks dominate the CLO market, which regulators say is between $84 billion and $105 billion in size. JPMorgan Chase alone holds about $30 billion in CLOs.
On a side note: one lone Republican who voted against the bill.
Law360, Los Angeles (January 13, 2015, 10:48 PM ET) — The U.S. House of Representatives held off on voting on a bill Tuesday that would take some of the teeth out of the Dodd-Frank Act by easing Volcker Rule requirements and keeping the U.S. Securities and Exchange Commission from regulating some private equity outfits as brokerage firms.
The lawmakers debated for an hour on the Republican-anointed “Promoting Job Creation and Reducing Small Business Burden Act,” a measure to make “technical corrections” to Dodd-Frank and ease the requirements in it under the Volcker Rule, which restrains proprietary…
Despite the win for Sen. Elizabeth Warren’s (D-Mass.) wing of the Democratic Party, the House Rules Committee announced Thursday evening that the lower chamber would take another crack at the bill, HR 37. Without two-thirds, however, Republicans will be unable to overcome the veto President Barack Obama promised Wednesday night.
The House Rules Committee will take up the bill Monday night, and it’s expected to go to the floor under normal rules.
The willingness to bring the bill back to the floor is a sign Republicans have not been scared off of attempts to chip away at Wall Street reform by the populist mood Himes described.
The bill would allow banks to hold onto billions of dollars in risky collateralized loan obligations for two additional years by amending the Volcker Rule, which is part of the 2010 Dodd-Frank financial reform law. The rule bans banks from speculating in securities markets with taxpayer funds, requiring them to dump their CLO holdings. A Volcker Rule delay would be a major boon to the nation’s largest banks. Between 94 percent and 96 percent of the domestic CLO market is held by banks with at least $50 billion in assets, according to federal regulators, who value the market at between $80 billion and $105 billion. Of that total, about half is owned by just two banks: JPMorgan Chase and Citigroup.