G20 expresses confidence that Volcker Rule will be minimized

Senior officials from the Group of 20 economic powers expressed confidence at a recent financial conference that the U.S. will minimize the Volcker Rule.

“There is a concern that it could have [an] unintended consequence, that it will restrict the traditional role that banks have played as go-betweens,” a U.K. official attending the G20 conference said, according to Reuters.

The official also added that “very constructive” talks were being conducted with the U.S. government, noting that the British government was very confident that the two powers could reach an agreement, Reuters reports.

Under the Volcker Rule, banks are prohibited from participating in proprietary trades. The rule extends exemptions to trade in U.S. treasuries but not to trade in debts from other nations, an issue that many critics see as a potential risk to market stability.

“It’s clearly a rule that discriminates against all trading that takes place in sovereign debt that’s not U.S. debt,” Luis Tellez, the head of Mexico’s stock exchange, said, according to Reuters.

Bank officials from several nations, including Canada, Japan and Mexico, have warned the U.S. against implementing the rule as is, saying that the proposal could hurt market liquidity.

Jacob Frenkel, the chairman of JPMorgan Chase International, criticized the U.S. for trying to institute the rule despite growing international concern.

“It’s playing with fire. You don’t do that with medicine, and you shouldn’t do it with economic policy and financial regulation,” Frenkel said, Reuters reports.

Regulators are currently struggling with how to proceed on the measure. The next steps could include adopting the proposal as it stands or re-proposing a streamlined version of the rule.

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