Tags: Volcker | rule | bank | S&P

S&P: Volcker Rule Pulls $10 Billion From Bank Profits

Thursday, 12 Dec 2013 07:54 AM

By Dan Weil

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The country's eight biggest banks apparently have 10 billion good reasons to oppose the Volcker rule, which was designed to curb their proprietary trading.

The rule will yank up to $10 billion in pre-tax profit a year from those eight institutions, thanks to decreased revenues and elevated compliance costs, Standard & Poor's estimates, according to The Wall Street Journal.

The rule will make banks take a fine-tooth comb through all of their trading activities, creating major upheavals for the country's biggest financial institutions, the paper explained.

Editor’s Note:
5 Phases of a ‘Retirement Heist’ Exposed (See Video)

As for Volcker himself, the former Federal Reserve chairman told The Journal that the rule "will help the stability of the broader economy" by renewing faith in bank safety.

The Volcker rule hits banks at a vulnerable time. They already have endured a slowdown in trading and an increase in mortgage rates, The Journal noted.

Goldman Sachs may suffer most from the rule, as much of its income stems from trading and investments, according to The Journal.

About 25 percent of its annual revenue is "at risk from Volcker," FBR Capital Markets said in a commentary obtained by the paper.

To be sure, the rule still allows banks to engage in market-making.

"I sat in the middle of a trading room for the first 28 years of my career, and it's very hard to distinguish between market-making and proprietary trading," said Thomas Strauss, vice chairman of Cowen Group and a former president of Salomon Brothers, told The Journal.

"It appears to be reasonable and one that the industry can live with," Richard Kovacevich, former CEO of Wells Fargo, told Bloomberg.

"The devil is always in the details. The question is how do the regulators implement the rule?"

Editor’s Note: 5 Phases of a ‘Retirement Heist’ Exposed (See Video)

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