The rule will adversely affect financial market operations in Canada as the proposed ban on proprietary trading by banks in the US will not apply to US government bonds. Canada is seeking an exemption for its government bonds similar to that for US treasuries.
The rule, which aims to restrict risky trading at banks that operate with federal guarantees, is expected to be finalized by summer this year, and then banks will have to comply with the new norms during the two-year transition period, reported thestar.com.
Canadian federal finance minister Jim Flaherty and Bank of Canada governor Mark Carney was quoted by the website as saying that the new US regulation will seriously affect Canadian economy and will prepare background for another 2008-09 financial meltdown, which was first erupted on Wall Street.
"Indeed, the proposed rule may undermine, rather than support, progress toward creating a safer, more resilient and more efficient global financial system," said Carney.
The finance minister said that the Volker rule in its current form will dampen the smooth functioning of Canada’s stock and bond market, thus avoidable for the Canadian financial system.
