In the coming months, regulators will finalize the Volcker rule, and it will be vital for them to address what are permitted activities — particularly market-making and hedging activities — and those that are not.
One fundamental change that they need to make when finalizing the Volcker rule is to switch the underlying presumption of the current proposal. The proposal deems any possible risk-taking activities conducted by a financial institution in service to clients as a prohibited activity until proven otherwise. That’s like saying you are guilty until proven innocent. It should be the other way round.
We urge regulators to look at the facts and focus on producing regulations that will allow firms to create markets for their clients, to effectively hedge their own risks, to provide lines of credit to businesses and to make loans available to families. Let’s not play politics with something so important to the proper functioning of our financial system, to fueling economic growth and to job creation.
Tim Ryan is president and CEO of the Securities Industry and Financial Markets Association.