Volcker 2.0 Is Too Little, Too Late for Wall Street’s Traders
The long-awaited rule change will most likely increase market volume and liquidity only modestly.
If Paul Volcker is on board, that should be a sign that the new rule is no green light for traders to run rampant.
Photographer: Pete Marovich/Bloomberg
Five Wall Street regulators have finally released their overhaul to the Volcker Rule after years of complaints from America’s biggest banks. Seemingly, it would be a reason for the industry to cheer.
Instead, it feels like little to get excited about, given that the rewrite comes less than a month after news that Citigroup Inc. was preparing to cut hundreds of jobs in its trading division, a sign that banking executives might be worried about more lasting challenges to the business. Trading revenue at the five biggest U.S. banks dropped 8% in the second quarter and 14% in the first quarter. It’ll take more than tinkering around the edges and simplifying the “proprietary trading” ban to lift bankers’ spirits given the specter of layoffs. To top it off, the inverted U.S. yield curve is poised to further erode the firms’ crucial net interest margins.