Volcker Rule ‘efficacy’ under scrutiny

Efforts to assess the effectiveness of the rule were discussed at a Monday meeting.

A formal assessment of the effectiveness of the Volcker Rule could be launched following a meeting of the Financial Stability Oversight Council on Monday.

The closed-door meeting was chaired by President Donald Trump’s Treasury secretary Steven Mnuchin, who said in a statement that “efforts to assess the efficacy of the Volcker Rule” had been discussed.

The rule, part of the Dodd-Frank Act, sets limits on the amount of Tier 1 capital banks can invest in private funds. It has resulted in a mass sell-off of private fund assets by some of Wall Street’s biggest banks.

Goldman Sachs said in its first quarter earnings call on 18 April that it has secured a five-year extension to the deadline for divesting its holdings, which had originally been this July.

Bankers have called for regulators to be better co-ordinated – it is interpreted and implemented by five different agencies – and make its execution simpler. Any further reforms would likely require Congress to change the law.