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U.S. regulators extend public comment period for proposed easing of Volcker Rule

U.S. regulators said on Tuesday they will giving the public an extra 30 days to comment on a proposed rewrite of the “Volcker Rule” banning proprietary trading by banks.

The five regulators charged with enforcing the rule will now accept comments until Oct. 17. Regulators announced a proposal to simplify the rule at the end of May, after years of complaints from banks that the original rule was too complicated.

The Volcker Rule was a centrepiece of tougher rules established following the 2007-09 financial crisis, and is aimed at barring banks from engaging in profit-seeking trades with customer funds.

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The U.S. Federal Reserve, Federal Deposit Insurance Corporation, Securities and Exchange Commission, Commodity Futures Trading Commission and Office of the Comptroller of the Currency share responsibility for writing and enforcing the rule.

A final version of the rule could be completed as soon as early 2019.

The proposed rewrite released in May was aimed mainly at simplifying some of the more subjective parts of the original rule, which directed regulators to ascertain if a trader was making certain trades for profit or to maintain market liquidity. Banks also had to prove to regulators certain short-term trading was permissible, or it was assumed to be non-compliant.

However, the banking industry is airing concerns with regulators about efforts to fix those parts of the rule. In an attempt to make the rule’s requirements more objective, regulators floated using accounting metrics to show that a particular bank’s trading is not improperly boosting bank profit.

But the industry is warning that the accounting test could envelop investments that were not captured by the original Volcker Rule requirements, forcing banks to further rework trading operations or revisit certain investments.

Meanwhile, consumer group and liberal critics of Wall Street, such as Democratic Senator Elizabeth Warren of Massachusetts, have criticized the proposed rewrite for making the rule too weak, potentially inviting banks to engage in riskier activity in pursuit of profit.

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