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What progress was made on regulatory reform rulemaking in 2012?
SIFMA remains strongly supportive of comprehensive, balanced reform to financial regulation, both here in the US and globally. We’ve supported rules when we believe regulators have gotten them right, and objected to proposals we feel miss the mark. Our economy cannot withstand rules that inadvertently create new pockets of risk — like central clearing and the Volcker Rule.
No one, however, can be happy about where the reform process stands. The problems began as a result of the political and bureaucratic constraints that produced a complex 2,300 page law, leaving the great majority of detailed decisions to the regulators. Only one-third of the required rules have been finalised and while regulators have adopted some critical provisions related to non-bank SIFIs and Orderly Liquidation, many major rules, and their extraterritorial application, remain unresolved.
Looking ahead to 2013, what aspects of regulatory reform concern you the most?
We’re expecting the final version of the Volcker Rule to be released sometime in the first quarter of 2013. That’ll be a big issue for our industry. Will they get the rules around market-making correct? Will they faithfully implement the rule while not inhibiting bank’s ability to make markets for different kinds of products on behalf of clients? We’ll have to see.
Additionally, we will to continue to press the CFTC and SEC to coordinate better on their derivatives rulemakings that are set to be finalised in 2013. It’s a massive new regulatory structure for these products and the coordination among the regulators has been lacking. We hope that the FSOC can take more of a leadership role here and drive for better coordination.
What were some of the most significant industry events of 2012? Why?
The continuing Dodd-Frank rulemaking was a large focus for the industry this year and will continue to be. As we all know, it’s a massive amount of rulemaking that needs to get done, and it needs to get done right. That’s why it’ll be important for regulators to spend the time on economic analysis on each of these rules, coordinate with their fellow regulators to ensure parallel rulemakings, and ensure the industry has a voice in the process to ensure that these rules to not unintentionally inhibit capital formation, lending and economic growth.
What trends do you see shaping the industry in 2013?
Again, Dodd-Frank rulemaking and how rules are finalised will be a dominant force in our industry throughout 2013. Beyond that, the likely rise of debate in Congress on tax reform, specifically on the business side of the Code as well as housing finance reform. These debates and the results of them will have a huge impact on markets, and SIFMA will play an active role in those dialogues.