Banks gain Volcker reprieve until 2017

Banks gain Volcker reprieveBanks will have longer to comply with the Volcker Rule, a key part of the 2010 Dodd-Frank financial reform bill, after the Federal Reserve extended a deadline on certain areas of the act in a move heavily criticised by the man whose name the law bears.

The Fed will give banks until July 2017 to sell off their holdings in private equity, venture capital and hedge funds. It had previously already granted a one-year extension until 2015.

Coming after lawmakers watered down a key bill on derivatives trading, this is being seen as the latest victory for Wall Street after heavy lobbying by banks. Last week Congress repealed a provision that required banks to place riskier investments into separate holding companies that would not be insured by the US government.

Former Fed chairman Paul Volcker, whose tough monetary policy measures contained inflation in the 1970s, was not impressed by the latest extension to implementation.

"It is striking that the world's leading investment bankers, noted for their cleverness and agility in advising clients on how to restructure companies and even industries, however complicated, apparently can't manage the orderly reorganisation of their own activities in more than five years," he said in a statement.

“Or, do I understand that lobbying is eternal, and by 2017 or beyond, the expectation can be fostered that the law itself can be changed?”

Banks could hold on to certain investments until 2022, as Dodd-Frank allows for an extra five years to offload illiquid assets. A 2015 deadline remains in place for the other main part of the Volcker Rule that stops banks from engaging in proprietary trading in their broker-dealer arms.

While a welcome relief for banks, the deadline extension has come in for further criticism from policymakers. Senator Elizabeth Warren, D-Massachusetts, said it would allow banks to “more time to make risky bets with taxpayer-backed money”.

The Volcker Rule is a key part of the Dodd-Frank Act, which seeks to limit banks’ riskiest trading activities.