Investors opposed to ban on proprietary trading

Global investors support U.S. legislation that would raise capital requirements for banks and strengthen consumer financial protection, even as they oppose the so-called Volcker Rule to ban proprietary trading by financial institutions, a Bloomberg News survey shows.
Seven out of 10 investors support moving trades of standardized derivatives to exchanges while slightly more than half reject a rule that would force financial companies to separate their swaps desk from commercial banking, according to a global quarterly poll of investors and analysts who are Bloomberg subscribers.
Investment professionals said they want to see changes to rein in risk-taking, the survey released last week showed, even after Wall Street firms spent months lobbying against much of the regulatory overhaul put forth by President Barack Obama and U.S. lawmakers.
“‘Stop us before we break the economy again,’ seems to explain why they are not just accepting of new regulations, but think they are a good idea,” said J. Ann Selzer, president of Selzer & Co., the Des Moines, Iowa-based firm that conducted the poll.
Regional differences were pronounced on the swaps-desk and consumer-protection provisions. Forty-six percent of Asian investors in the survey said they supported separating the trading desks, compared with 33 percent of U.S. investors.
Walling off swaps desks from commercial banking “would ensure that capital is not taken from other banking areas and used to meet regulatory requirements of derivative trading or cover the losses being experienced in derivative trading,” said poll respondent Raphael de Santos, a U.K.-based analyst. “This will mean that capital needed for the real economy, personal and corporate lending, won’t be taken up by fictitious investments.”
Establishing an agency to oversee consumer financial protection was favored by 51 percent of U.S. respondents, while 43 percent said they thought it was a bad idea. Support was higher in Asia, with 80 percent of investors favoring the idea, and in Europe, where 66 percent said it’s a good idea.
“We need some kind of protection for the consumer, yes we do. I don’t think a federal consumer agency is going to do the job,” said respondent Joseph Offerman, a financial adviser at Merrill Lynch & Co. Inc. in Clearwater, Fla. “Bigger government has not proven to be helpful in any way, shape or form.”
Almost three-fourths of all investors opposed the proposal that would prevent banks from trading for their own investment book under a rule named for Paul Volcker, the former Federal Reserve chairman who proposed it. &#8226