The Volcker Rule may not be implement until the second half of 2013, according to sources cited by the Wall Street Journal. Sources told the paper that the specifications of the rules were proving complex to form, and the final version is likely to be delayed. The news will adversely affect the ability of banks to prepare for the implementation of the rules.
The rule will address a huge swathe of financial institutions. The most egregiously affected are likely to be the biggest and most complicated banks, including Bank of America Corp (NYSE:BAC), Citigroup Inc. (NYSE:C), and JPMorgan Chase & Co. (NYSE:JPM). The delay in specification is likely to drive costs at these banks higher.
The Volcker rule is a group of special provisions of the Dodd-Frank bill on financial regulation. The rule restrains banks from making speculative investments that do not benefit their customers. The provisions were originally set to be implemented in mid 2012, but delays have pushed the date back.
Major banks, like JPMorgan Chase & Co. (NYSE:JPM) and Citigroup Inc. (NYSE:C), already know what the general provisions of the Volcker Rule will be. What is making their jobs harder is the lack of specific details. This delay means that they will spend more months trying to prepare for rules they're unsure of .
Once the specifications of the Volcker Rule come out, Bank of America Corp (NYSE:BAC) and company will have to institute a major drive toward compliance, in order to meet deadlines set out by the law. That means higher costs at the major banks for a short period of time, particularly if their initial preparation is not in line with the unknown specifics.
The delays are being caused by negotiations between three major regulators, including the SEC and the Federal Reserve. The complexities of the issues at hand, deciding which money belongs to banks and which to its customers, have made the specifics incredibly difficult to write.
Major banks will not be impressed. It is possible that the Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), Bank of America Corp (NYSE:BAC) and other big players will attempt to have implementation dates delayed so that they have time to get their houses in order. If they are not permitted that luxury, it is likely that compliance costs will increase for them in the second half of 2013.