TORONTO (Reuters) - Canada's financial services regulator and the country's banking sector are pushing back against the Volcker rule, a key plank of U.S. financial reform that they say would unfairly punish Canadian banks that deal closely with the U.S. market.
The rule, a controversial part of the massive 2010 Dodd-Frank financial oversight law, is designed to prevent U.S. banks from trading with their own funds and to limit investments in hedge funds and private equity firms.
But in a letter delivered to U.S. authorities in December and made public on Friday, Canada's Office of the Superintendent of Financial Institutions (OSFI) said the draft rules would limit Canadian banks' ability to manage their risks and efficiently manage their liquidity.
The Volcker rule would apply to each foreign bank with a branch, agency or subsidiary in the United States. Canada's five biggest banks all have a notable presence in the United States.
CANADA BANKS U.S. PRESENCE
Terry Campbell, head of the banking industry lobby group, said the rule could have the effect of squeezing liquidity from the Canadian bond market, noting that the law treats Canadian bonds as higher-risk securities than U.S. bonds, and has exemptions only for banks that trade in U.S. debt.
This could cause problems for Canadian banks with U.S. operations that routinely move large amounts of Canadian sovereign debt as part of the normal operations of Canada's bond market.
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(Reporting By Cameron French; editing by Rob Wilson)
http://ca.finance.yahoo.com/news/regulator-banks-aim-u-volcker-170116183.html
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