On February 23rd, 2014, Paul Adolph Volcker，former Federal Reserve Chairman, was invited by the National School of Development, Peking University to deliver a speech themed “the financial order after the Volcker Rule”.
“The reason behind implementing the Volcker Rule is to help governments restrict banks from making harmful speculative investments. A functioning commercial banking system is essential to the stability of the entire financial system, for banks to engage in high-risk speculation created an unacceptable level of systemic risk. The vast increase in the use of derivatives, designed to mitigate risk in the system, has produced exactly the opposite effect. Therefore, the government needs to prohibit commercial banks from carrying out proprietary trading, which is the key of Volcker Rule.
However, even if governments around the world approve the Volcker rule, they may meet many difficulties in implementing the rule. If the rule is only adopted by the US government, large commercial banks will not take it seriously, for they can conduct speculative proprietary trading in the financial markets in other countries. Therefore, international cooperation is imperative. Over the past two years, the U.S. government and the British government has carried out cooperation in this regard, because the United States and Britain are two large global financial markets, and the euro zone is also working with the United States. Implementation of the Volcker rule is not easy but has made some progress.
I am optimistic and hope that China will join us in the promotion of this financial regulatory rule.”
Background Information:
Paul Adolph Volcker is an American economist. He was Chairman of the Federal Reserve under Presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987. He is widely credited with ending the high levels of inflation seen in the United States during the 1970s and early 1980s. He was the chairman of the Economic Recovery Advisory Board under President Barack Obama from February 2009 until January 2011.Paul Volcker puts forward the Volcker Rule to restrict United States banks from making certain kinds of speculative investments that do not benefit their customers.
Written by: Sun Qisheng
