An official of TIAA-CREF testified before a House panel today that the proposed regulation providing a limited exemption for life insurance companies from the so-called Volcker rule is an area of concern to the industry because it does not appear to reflect legislative intent.
Scott Evans, executive vice president, TIAA-CREF president of asset management, said the problem with the proposed rule as currently structured is that it does not expressly allow the general account of an insurance company to hold an ownership interest in a so-called “covered fund.”
In addition, Evans said, the proposal defines covered funds in a way that essentially designates all private equity funds as covered funds.
“This is an area of concern not only to TIAA-CREF, but to many in the insurance industry since private equity investments are widely utilized by insurers’ to diversify investment portfolios, both for the benefit of their general accounts and on behalf of customers,” Evans said.
Evans testified at a hearing examining the impact of the Volcker rule on markets, businesses, investors and job creation.
The hearing was held by the Subcommittees on Capital Markets and Government Sponsored Entities and Financial Institutions and Consumer Credit of the House Financial Services Committee.
The Volcker rule is contained in the Dodd-Frank financial services reform law. It would reduce the ability of the nation’s largest financial institutions from making large investments that could produce large losses.
It was proposed by Paul Volcker, 84, chairman of the Federal Reserve Board during the Carter and Reagan administrations, while he was serving as an advisor to President Obama in 2009-2010.
In testimony today, trade groups, including the Securities Industry and Financial Markets Association, argued that the narrow definition of what’s allowed under the proposal will curtail the role of banks as market-makers.
This will prevent them from purchasing securities clients want to sell without first finding a buyer, witnesses said. That could reduce liquidity and increase transaction costs for companies, according to a study released last month that was commissioned by the financial services industry.