As reported in Reuters on October 1, 2010 “The Financial Stability Oversight Council held its first meeting and voted to seek public comment for a period of 30 days on the Volcker rule, which restricts risky bank trading.
The panel also sought comments on what criteria should be used to decide which large non-bank financial companies should be supervised by the Federal Reserve.
Both votes were unanimous.
The council was created by the recently enacted financial regulatory overhaul law and is headed by U.S. Treasury Secretary Timothy Geithner, joined by top officials from the Fed, Securities and Exchange Commission, the Commodity Futures Trading Commission and the Federal Deposit Insurance Corp.
“We’re going to try very hard to make sure that these rules, this huge complicated burden of rule writing that is ahead of us or ahead principally of the agencies around this table, is done carefully and quickly,” said Geithner told the meeting.
The Dodd-Frank Act tasks the panel with identifying threats to markets before they metastasize, in order to prevent a repeat of the 2007-2009 financial crisis.
The Volcker rule restricts banks from trading with their own money, known as proprietary trading, and only allows them to invest up to 3 percent of their Tier 1 capital in hedge funds and private equity funds.
Non-bank financial institutions that the council designates for supervision by the Fed would be subject to the government’s new powers to seize and liquidate failing financial giants to prevent chaos in the financial system.
The panel hopes to issue a proposed rule for comment on the criteria and process for designating non-bank firms by the end of the year, allowing a vote on a final proposal by the end of March.”
