The Federal Financial Forum

(Reuters) – The Federal Reserve will try to make it clearer whether new banking rules apply to small lenders, Federal Reserve Chairman Ben Bernanke said in remarks on Wednesday.

Bernanke said the goal is to prevent community banks from wasting time and money trying to figure out if a new regulation applies to them.

“Although this change seems relatively simple, we hope it will help banks avoid allocating precious resources to poring over supervisory guidance that does not apply to them,” Bernanke said in a video message to an Independent Community Bankers of America conference in Nashville, Tennessee.

(Reuters) – The Volcker rule crackdown on banks’ trading activities could affect the liquidity of sovereign debt markets, a top Bank of Japan official warned U.S. regulators on Monday.

Liquidity could be hit if the Volcker rule does not exempt foreign debt from banks’ trading restrictions, Kiyohiko Nishimura, the Bank of Japan’s deputy governor said at the Institute of International Bankers conference in Washington.

U.S. regulators are under pressure to craft the Volcker rule so that it does not restrict trading in countries’ foreign debt. The Dodd-Frank law, enacted in response to the 2007-09 financial crisis, provides an exemption for trades in U.S. debt but not securities issued by other countries.

From: Washington Post

By Zachary A. Goldfarb and Howard Schneider

 new federal rule aimed at limiting the freewheeling trading of banks is prompting protests from local and foreign governments alike, which warn it could compromise their ability to borrow money needed to pay for public projects and operations.

States and localities — including in the Washington area — say the new regulation, known as the Volcker Rule, could make it more expensive for them to raise money from investors to pay, for instance, for environmental clean up and housing assistance. European governments warn the regulation could further aggravate their debt crisis, which is already roiling global financial markets.

From: WSJ

By VICTORIA MCGRANE And JON HILSENRATH

The Federal Reserve has operated almost entirely behind closed doors as it rewrites the rule book governing the U.S. financial system, a stark contrast with its push for transparency in its interest-rate policies and emergency-lending programs.

While many Americans may not realize it, the Fed has taken on a much larger regulatory role than at any time in history. Since the Dodd-Frank financial overhaul became law in July 2010, the Fed has held 47 separate votes on financial regulations, and scores more are coming. In the process it is reshaping the U.S. financial industry by directing banks on how much capital they must hold, what kind of trading they can engage in and what kind of fees they can charge retailers on debit-card transactions.

From:  Huffington Post

Are exotic financial derivatives as risky as untested prescription drugs? Two University of Chicago economists say possibly. As noted by economist Steve Levitt in his Freakonomics blog, professors Eric Posner and Glen Weyl proposed in a recent white paper the creation of a regulatory body that could prescreen financial products — like the subprime-asset stuffed securities that nearly brought down the U.S. economy — before they’re sold to other banks or investors. In other words, an FDA for CDOs.