Concern over Volcker Rule Risks

Bankers at the Institute of International Finance conference in Mexico City expressed worries over new financial regulations of the U.S.’s proposed Volcker rule to ban proprietary trading, making an exception for trades involving U.S. Treasuries.

“The Volcker rule will diminish liquidity in the exchanges,” said Luis Tellez Kuenzler, chief executive officer of Bolsa Mexicana de Valores SAB, Mexico’s Stock Exchange. “It’s an issue that will affect and is affecting most of the exchanges around the world.”, Businessweek reported.

The U.S. has already faced resistance from foreign governments over its proposed ban on proprietary trading. The regulation, named for former Federal Reserve Chairman Paul Volcker, was included in the Dodd-Frank act to restrict risky trades at banks that operate with federal guarantees

While U.S. government securities aren’t included in the proprietary trading ban, foreign securities did not receive an exemption from the restriction.

Policy makers will probably discuss the Volcker rule during their meetings this weekend, a Canadian finance official said Feb. 23. Finance Minister Jim Flaherty told reporters he’d bring up the issue with Geithner, and that he’s hopeful a reasonable solution can be reached, according to Businessweek.

Amwal Al Ghad