Financial regulator says Volcker rule implementation will be costly for banks at $4.3 B

A study by the Office of the Comptroller of the Currency had said that national banks in the US will be shelling a collective $4.3 billion maximum just to comply with the Volcker Rule once passed. The regulator said that the amount will come from selling restricted investments at losses.

The report, which was released yesterday, also revealed that the banks supervised by the US regulator will mostly be those who has assets worth over $10 billion and that as many as seven community banks will be affected.

Bloomberg said that the Volcker Rule, which was named after former US Federal Reserve Chairman Paul Volcker, will be banning banks from trading speculative assets using their own money and reduces the banks' shares in several private funds. The legislation, said the news agency, was adopted by five regulators in the US on December 10 last year. The legislation was drawn up in response to the credit crisis felt greatly by the US in 2008.

One part of the report by the OCC explained the effect of the rule upon the banks it regulates, which read, "The range of our cost estimate primarily reflects the uncertainty of the final rule's impact on the market value of banks' investments. (After Volcker, the market value) could drop by up to 5.5 percent."

The OCC report also stated that selling the assets restricted under the Volcker Rule might cost as much as $3.6 billion for the banks. The remainder of the estimate will largely come from a maximum of 541 million stemming from compliance and reporting burdens.

Bloomberg said that the report by the regulator only focused on 46 larger banks as the analysis do not cover the potential costs the implementation of the rule will incur by other agencies like the Fed and the US Securities and Exchange Commission.

Majority of the banking industry has greatly reacted to the Volcker Rule, with some, like Zions Bancorporation, saying that they will be forced to sell their assets at way below acquisition price that the loss essentially offsets its yearly profits.

Tags

Volcker Rule, Office of the Comptroller of the Currency analysis on Volcker Rule implementation

© 2023 Lawyer Herald All rights reserved. Do not reproduce without permission.