Goldman Sachs said its trading revenue fell 25 percent from the third quarter, to $3.06 billion. The bank's larger New York rivals also announced declines in trading, with Citigroup saying fourth-quarter net-income dropped by 11 percent and JPMorgan, the biggest U.S. bank, announcing that fourth-quarter net income slid 23 percent as investment bank earnings fell by half.

In addition to the large financial firms, non-U.S. banks and governments also filed letters yesterday. Stuart Alderoty, senior executive president and general counsel for HSBC Holdings Plc, complained that the proposed rule "would apply not only to transactions with a U.S. counterparty, but also to transactions that have limited connections to the United States."

"As currently drafted," Alderoty said, "the proposed rule would limit the ability of our Hong Kong affiliate, which is independently capitalized, to purchase for its own account securities traded on a U.S. exchange, or trade for its own account utilizing a U.S. agent to effect a transaction."

July Start

The Volcker rule is set to take effect in July even if the rule-making is still in progress, and would include a two-year transition period. The Federal Reserve would then have the ability to issue multiple one-year implementation extensions on a case-by-case basis.

"I can't see how they would put all of this into effect by July," said Joseph Engelhard, senior vice president of Capital Alpha Partners LLC. "There's no way the banks will have all the infrastructure in place so they will have to delay parts even if they keep it similar to how it is."

The proposal included a series of exemptions for permissible market-making trading, underwriting and hedging transactions. Lawmakers exempted market-making from the rule, along with certain forms of hedging and underwriting, because of concerns that a broad ban on proprietary trading could bring some U.S. and world markets to a halt.

"The proposal will severely limit banking entities' ability to hedge their own risk, thereby increasing rather than decreasing the risk to banking entities and the financial system," the Clearing House Association, American Bankers Association, Securities Industry and Financial Markets Association, and Financial Services Roundtable said in a joint 173-page letter.

The bank lobbying associations also warned that the cost- benefit analysis in the Volcker rule didn't meet the standards set in a court case overturning a Securities and Exchange Commission rule last year. The letter referenced the Business Roundtable's victory against the SEC, which overturned the so- called proxy access rule because of an inadequate analysis of the costs. The U.S. Court of Appeals in Washington agreed with the U.S. Chamber of Commerce and Business Roundtable.

Global Impact

Officials from Canada, Japan, the United Kingdom, and the European Banking Federation sent letters to the U.S. Treasury Department and other regulators saying the measure would harm global liquidity and international cooperation. G-20 leaders have not endorsed the rule, which exempts U.S. government debt but not non-U.S. government bonds.