Policy Issues

VOLCKER RULE

ISSUE

The Volcker rule, which is part of the Dodd-Frank Act, prohibits banking entities from engaging in proprietary trading and from owning or controlling hedge funds or private equity funds. 

For the commercial real estate industry, the Volcker Rule has put a damper on secondary market trading of commercial mortgage backed securities (CMBS) by limiting the ability of banks to hold inventories of secondary market securities, thereby diminishing market liquidity.  In addition to restricting banks from buying certain securities for their own accounts (so-called proprietary trading), it also has prohibited them from investing in hedge or private-equity funds – including real estate.

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Position

In a 2012 comment letter to Federal Reserve and other financial regulatory agencies, the Roundtable raised concerns about the unintended consequences of the Volcker Rule that could "negatively impact liquidity and capital formation in commercial real estate."

Background

The Federal Reserve and other U.S. financial regulatory agencies proposed a revision to the 964-page Volcker rule in 2018 – one of the most controversial rules developed under the Dodd-Frank Act went into effect in 2013.

Fed Chairman Jerome Powell said regulators aim “to replace overly complex and inefficient requirements with a more streamlined set of requirements.”

The nearly 400-page proposal, known as Volcker 2.0, has not been well received by the financial services industry, and no decision has yet been made about adopting the 2018 scheme.  To address industry concerns, regulators are reportedly considering another rewrite, known as Volcker 3.0.

Yet, the nearly 400-page proposal, known as Volcker 2.0, has not been well received by the financial services industry, and no decision has yet been made about adopting the 2018 scheme.  To address industry concerns, regulators are reportedly considering another rewrite, known as Volcker 3.0.

In a 2012 comment letter to Federal Reserve and other financial regulatory agencies, the Roundtable raised concerns about the unintended consequences of the Volcker Rule that could “negatively impact liquidity and capital formation in commercial real estate”.


 

Other Resources

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Policy Agenda (Roundtable Goals & Advocacy)