Volcker Rule
The financial services industry has already invoked international trade rules in its bid to weaken proposed regulations, notably the Volcker rule that would ban proprietary trading. Named after former Federal Reserve chairman Paul Volcker, the rule is a signature part of Dodd-Frank.
The U.S. Chamber of Commerce sought a review of the rule by U.S. trade authorities, arguing it violated existing agreements.
In a Feb. 26 letter on the WTO negotiation, Allgeier said that the blanket exemptions for so-called prudential regulations, aimed at ensuring the safety and soundness of the banking system, should face some limits.
For example, domestic prudential regulators shouldn’t be able to discriminate against foreign companies, and should act in a manner that is “least trade and investment distorting,” Allgeier wrote. Also, capital requirements in financial services should not be used as “disguised barriers to entry or competition with domestic suppliers.”
The complaint about capital standards echoes Jamie Dimon, the chief executive officer of JPMorgan, in 2011. Dimon criticized capital standards created by the Basel Committee on Banking Supervision as “anti-American” over their additional penalties on large banks and liquidity rules.
‘Right Balance’
Allgeier said in an interview that the request was motivated by limits on U.S. companies in other countries made in the name of safety and soundness. To have a successful international negotiation, the U.S. regulators such as the Federal Reserve need to be flexible on what it’s willing to do so that other countries will agree.
“We need to find the right balance,” Allgeier said. The prudential regulators are going to start with the most conservative position, so can you move them to a degree that meets their objectives?’’
SIFMA, the Wall Street lobby, also said the EU agreement should cover “existing and future financial services laws and regulations that have significant transatlantic trade effects, significant extraterritorial effects, or both” in a May 14 letter.