This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Banks' Volcker Headaches Limitless

Stocks in this article: BAC C JPM WFC MS GS

NEW YORK ( TheStreet) -- The Federal Reserve on Thursday announced that large bank holding companies would need to comply with the Volcker Rule's ban on proprietary trading by July 21, 2014.

That gives the industry, regulators and Congress plenty of time to continue hash-out what the rule actually prohibits -- and what it allows -- as compliance headaches are sure to continue.

Paul Volcker

As part of the Dodd-Frank Wall Street Reform and Consumer Protection Act -- signed into law by President Obama in July 2010 -- the Volcker Rule prohibits bank holding companies from engaging in most forms of proprietary trading while severely limiting banks' investments in private equity funds and hedge funds. The rule was proposed by the president and supported by former Federal Reserve Chairman Paul Volcker.

Investment banks Goldman Sachs (GS) and Morgan Stanley (MS) and the "big four" bank holding companies, including Bank of America (BAC), JPMorgan Chase (JPM), Wells Fargo (WFC) and Citigroup (C) are already in the midst of a major transition in order to eventually comply with the rule, and an exodus of investment talent from the large banks has already begun, with analysts and portfolio managers starting their own hedge funds.

Foreign bank are also scrambling over Volcker. Deutsche Bank (DB), for example, in March reorganized its U.S. subsidiary Taunus Corp. so that it would no longer be considered a bank holding company, thus avoiding Federal Reserve supervision and escaping the Volcker Rule.

In its 2011 10-K report filed in late February, Morgan Stanley said that it's "business and operations are expected to be impacted" way before the July 2014 deadline, "as operating models, investments and legal structures must be reviewed and gradually adjusted to the new legal environment."

Kevin Petrasic -- a partner in the Paul Hastings Global Banking practice in the firm's Washington, D.C. office -- says that "Volcker is one more reason for foreign banks to reconsider their commitment to US interests, both operationally and on the investment/capital side of the equation," which "could have significant longer term implications for US capital markets and growth, as well as US jobs -- in the capital market arena and expanding outward from there."

Frank Mayer -- a partner in the Financial Services Practice Group of Pepper Hamilton LLP, in the firm's Philadelphia office -- said that "financial institutions are trying to understand exactly what the regulators think congress meant," when banning short-term proprietary trading, but making exceptions for certain risk management activities," and that "this period of time will allow the regulators, the industry and perhaps congress to hold hearings to establish congressional intent on this provision."

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs