Federal Reserve Board Chairman Ben Bernanke told Congress that he does not expect the Volcker Rule to meet its July 2012 implementation deadline.
“I don’t think it will be ready for July,” Bernanke told a House Financial Services Committee hearing on Feb. 29, 2012. He noted that the Fed recently closed the comment period, and now has about 17,000 comments and “a lot of very difficult issues to go through, so I don’t know the exact date but we’ll obviously be working on it as fast as we can.”
The Volcker Rule includes a two-year transition period, Bernanke said, noting that “we’ll make sure firms have an adequate period of time to adjust their systems and comply with the rule.”
Bernanke defined proprietary trading as “short term trading in financial assets for the purposes of the profits of the bank itself as opposed to its customers,” adding that “obviously it’s hard to know in every case whether it fits that definition or not.” He acknowledged that the most difficult distinction is between proprietary trading and market making because in cases of market making firms often have to buy assets that they hold for short periods, and then sell to a customer. “The question is, did they buy that asset for a proprietary purpose or did they buy it for a market making purpose, and we’ll need to develop metrics and other criteria to distinguish those two types of activities,” Bernanke told the hearing.
Bernanke agreed that the lack of clarity regarding Dodd-Frank regulations that have yet to be completed is a hindrance to the financial sector. “We’re working as quickly as we can. We want to create as much clarity as we can…some of these rules are complex, it’s important to get comment and input and do a good job,” he said.