A Securities and Exchange Commission regulator warned on Monday that lawmakers should re-design the proposed Volcker Rule, saying that the current proposal threatens market stability and could hurt U.S. competitiveness.
Dan Gallagher, a commissioner for the SEC, said that a review of the thousands of Volcker Rule comments reveals concern about the rule’s impact on the market economy.
“These comments provide powerful evidence that the benefits the proposed rule was designed to provide may come at an unacceptably high cost,” Gallagher said in a prepared speech at the Institute of International Bankers conference in Washington, Reuters reports.
Gallagher also advocated re-proposing the rule, the second time such a suggestion has been made by a U.S. regulator. Last month, Troy Paredes, another SEC commissioner, also advocated re-proposing a new draft of the Volcker Rule, which prohibits proprietary trading by banks.
Regulators have struggled to streamline the proposal amid growing fears that the rule would not only harm the U.S. financial market but would extend into foreign debt markets as well. Last week, Federal Reserve Chairman Ben Bernanke said that the Volcker Rule is unlikely to be ready before the July deadline.
Gallagher said that legislators should consider the concerns and possible market effects before proceeding with the final rule.
“We must avoid regulatory hubris and should not regulate – particularly where the changes are so novel of comprehensive – with the belief that we completely understand the consequences of the regulations we may impose,” Gallagher said, according to Reuters.