The two Wall Street banks were joined by competitors Citigroup, JPMorgan Chase and Bank of America, in prevailing upon the regulators to curtail the reach of the Volcker rule, which was included in the 2010 Dodd-Frank Act and will take effect in July. The US regulators had released a draft of the rule in October. The chief of staff of Goldman Sachs said that the proposed rule, if enforced without substantial revisions, would narrow the scope of permitted market making-related underwriting and hedging activities, due to which banks would be significantly limited in their ability to help their clients.  

 

He added that the proposed rule might inadvertently escalate systemic risk, although the key aim of Dodd-Frank was to ensure increased stability in the financial markets. Customers and Banking entities’ clients would also have to bear more risk on their own books if hedging becomes more expensive due to the rule. Thousands of comment letters have been sent to the Federal Reserve, SEC and other financial regulators.