Wall Street

There’s ‘room for maneuver’ on Dodd-Frank, says Goldman Sachs International chief

What is Dodd-Frank?

While much of the Dodd-Frank legislation to curtail excessive risk-taking by banks brought in after the global financial crisis has been good, there still remains scope for change, the chief executive of Goldman Sachs International told CNBC on Tuesday.

"I think much of what came in Dodd-Frank is very good and was absolutely appropriate. But there will be room for maneuver and for change and I'm sure we'll see some change," Richard Gnodde, speaking exclusively to CNBC at the Goldman Sachs Disruptive Tech Symposium about the financial reform legislation passed under former President Barack Obama's regime in 2010.

"Much of that regulation is very, very good regulation. But given the amount and the volume that is in place, I think it does make sense," said Gnodde, referencing the decision by President Donald Trump's administration to review the "enormous amount" of regulation adopted both in the U.S. and globally over the past eight years.

Noting that European leaders are going through a similar process at the moment of looking at evidence and questioning what works and what is less effective, the veteran banker agreed that the U.S. administration had good reason to undertake an analogous review.

"What's most important is that we end up with a financial system that is safe and sound but can also perform what it's meant to perform, which is bringing capital in an efficient, cost effective way, bringing liquidity to the markets in a safe and sound way, so that the financial system can operate," he explained.

Former Rep. Barney Frank (D-Mass.) (L) and former Sen. Chris Dodd (D-Conn.) talk about their hallmark and namesake legislation, the Dodd-Frank Wall Street reform law, on the fifth anniversary of the law at the Newseum July 20, 2015, in Washington.
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Meanwhile, Gnodde took a broadly positive view of the political and economic situation in the U.S.

"The narrative remains all about growth, job creation, infrastructure spending…I suspect in reality the machinery of government will continue to grind on and a lot of these initiatives will actually end up being enacted and we'll have a growth-oriented economy which of course is good for everybody. It's good for employment, it's good for wealth creation, in the end it's good for our business," Goldman Sachs' long-standing senior executive affirmed.

Gnodde's comments on Dodd-Frank came just as William Dudley, President of the New York Fed, told an audience in London that banks have "a long way to go" to reform internal culture and that performance incentives are still a problem within the industry.

Acknowledging Dudley's concerns, Jim McCaughan, chief executive officer (CEO) of Principal Global Investors, told CNBC's Squawk Box that these points were valid.

"It would be undesirable just to repeal Dodd-Frank and leave nothing in terms of regulation to ensure market conduct. Free markets need a bit of rails to put the train on. They need some sort of rules of conduct which ensure transparent markets," he opined.

Expressing no surprise that Barclays' CEO Jes Staley had recently told CNBC that he did not think that Dodd-Frank should go, McCaughan said that "banks have got used to operating with it so that makes some sense."

"Any change in regulation causes businesses disruption and effort, even if that's lessening regulation. So the deregulation story is not really the key part in the near term of the Trump trade."

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