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Goldman Sachs exec says Volcker Rule will let banks charge clients more

David Viniar

A senior Goldman Sachs executive said on Wednesday that the Volcker Rule may actually bolster the bank’s profitability, as the rule mandated by the Dodd-Frank Act would create a changing financial market and allow the banks to charge clients more.

According to Reuters, Goldman Sachs Group Inc. CFO David Viniar said at a Credit Suisse conference in Miami that a rough interpretation of the rule, which bans proprietary trading by banks, could help equity returns, as banks would be able to charge clients more for trades, according to Reuters.

“Regulation will undoubtedly bring about new ways in which the industry must manage its operations and deliver its services to clients,” Viniar said, Reuters reports. But, he continued, regulatory challenges “must be effectively navigated in order to provide shareholders with acceptable returns.”

Return on equity is a monitored indicator of how efficiently banks use shareholder funds to earn profit. Goldman Sachs saw ROE fall to 3.7 percent in 2011, down from above 30 percent in 2006 and 2007.

If Goldman Sachs excluded profits and losses from businesses affected by the Volcker Rule from 2004 through 2011, Viniar showed, the bank would have shown less volatility with the same average quarterly returns.

Goldman Sachs executives forecast an ROE target at 20 percent after the financial crisis when the markets and economy became more stable. The bank has since moved away from that target without presenting a new one due to uncertainty surrounding financial reform.

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