August 21, 2012 / 3:52 PM / 5 years ago

Final Volcker rule expected by year-end - Treasury official

Aug 21 (Reuters) - U.S. regulators plan to unveil a final version of the Volcker rule by the year-end, a Treasury official said, and banks will have to start complying with some parts of the rule soon after that.

The Volcker rule, which limits big banks’ ability to place market bets with their own money, is one of the most hotly debated elements of the 2010 Dodd-Frank financial reform law.

The Treasury Department is coordinating a group of five regulators writing the Volcker rule, whose implementation is now a month past its initial deadline.

The delay stems from differences in how regulators want the rule to be implemented, as well as an overwhelming volume of feedback from industry groups and the public, said the official, speaking on Monday on the condition of anonymity.

The official would not elaborate on the differences in the regulators’ views.

Still, the official said “something will get done this year” because regulators want to provide clarity to the market about what the rule will say.

Regulators first proposed a roughly 300-page version of the rule in October, but it included hundreds of questions for public comment, indicating the final version could look significantly different.

Uncertainty about the Volcker rule has been weighing on shares of banks with big trading desks such as Goldman Sachs Group Inc, Morgan Stanley, JPMorgan Chase & Co , Citigroup Inc and Bank of America Corp. Many analysts expect the rule to have a negative impact on Wall Street’s bottom line.

The five agencies working to craft the rule -- the Federal Reserve, the Securities and Exchange Commission, Federal Deposit Insurance Corp, the Commodity Futures Trading Commission and the Office of the Comptroller of the Currency -- are working well together, but it has taken time to sort through the 18,000 comments they received, some of which are longer than the proposal itself, the Treasury official said.

Federal Reserve Chairman Ben Bernanke said in February that the rule would not get done by its initial July 21, 2012, deadline, but regulators had not provided a definitive timeframe for its completion. Once the rule is in place, banks will have until July 21, 2014, to fully comply.

The Treasury official also said the newly created Office of Financial Research is already crafting reports, though it does not yet have a confirmed director.

The office, which was created by Dodd-Frank and examines broad market data to identify systemic risks, has looked at exposure of U.S. financial institutions to European financial institutions. Its 70-member staff is also looking closely at interest-rate risk, and the state of readiness of the financial system for any possible increase in rates.

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