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Volker Rule Would Hurt U.S. Firms

Posted on 1/19/2012

Acting Comptroller of the Currency John Walsh said during a House hearing yesterday that the Volcker Rule's limits on proprietary trading and hedge fund investments would cause U.S. banks to operate at a competitive disadvantage with foreign institutions.

"Foreign jurisdictions have not adopted restrictions resembling those in the Volcker Rule," Walsh said during the joint hearing of the House Financial Services Capital Markets and Financial Institutions subcommittees. "So a foreign bank that is not subject to [the rule] because it does not have the requisite U.S. banking operations will remain unaffected by the Volcker Rule. Accordingly, U.S. banks competing with these foreign banks will operate at a competitive disadvantage."

Other regulators acknowledged that drawing a bright line between trades that are prohibited and those that are permitted will be a significant challenge, but expressed the belief that they could implement the new rule without impairing U.S. financial markets.

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