News analysis: Volcker's next steps?

Shortly before the holiday period, US regulators extended the public comment period on the so-called 'Volcker Rule' – a proposal that severely restricts banks ability to own or sponsor private equity funds. 

Comments on the rule will now be accepted until 13 February, 30 days past the original 13 January deadline. 

The extension came shortly after a bipartisan group of 121 US House lawmakers urged regulators to slow down adoption of the rule, saying its impact on the economy was too severe to quickly throw together. 

“Additionally regulators should consider producing an interim proposed rule reflecting the comments from affected stakeholders…and extend the implementation deadline,” lawmakers wrote in a letter to the Securities Exchange Commission and three other regulatory agencies. 

It will obviously be very difficult indeed for market participants to adopt compliance and reporting structures by the July date Robin Maxwell

As it stands, banks must put in place a number of preliminary compliance measures by 21 July, the date Volcker goes into effect. However banks won't be sure of their requirements until proposals are adopted – a milestone likely to be delayed as a result of the comment period extension, said Robin Maxwell of Linklaters, a law firm. 

“It will obviously be very difficult indeed for market participants to adopt compliance and reporting structures by the July date, which the proposed rule suggested they would have to,” said Maxwell in an interview. “Many of our bank clients are hopeful that, even if the July date is not technically extended, the regulators will be liberal in their interpretation of the two year conformance period so that banks will have a reasonable amount of time to understand and design systems to comply with the new rules”. 

Given that the July deadline is mandated under Dodd-Frank, it will be difficult to extend Volcker's implementation date, said Greg Lyons of law firm Debevoise & Plimpton in a separate interview. “However, on balance, I think many in the industry prefer to have the agencies take extra time to thoroughly review comment letters and meet with trade groups and individual institutions.

“Stated differently, although neither option is optimal, I think many in the industry would prefer to try to help the agencies get the final rules done 'right' than quickly,” he said.