The president of Goldman Sachs Group Inc said on Thursday that there is no indication that the investment bank is close to settling U.S. fraud charges with the Securities and Exchange Commission.
Goldman Sachs President Gary Cohn also said there is no sense of timing on a potential settlement, adding that Goldman's client franchise was strong.
There's no indications of anything at this point on a settlement or its timing, Cohn told reporters on the sidelines of a conference in Montreal.
Our client franchise is very strong. We've built up a relationship with our clients over 140 years. We continue to service our clients, we continue to serve our client needs. Our clients are very loyal, he said.
In April, the SEC charged Goldman with civil fraud in connection with the structuring and sale of a debt security called Abacus 2007. The SEC is investigating another Goldman mortgage-linked deal called Hudson Mezzanine Funding, a source familiar with the matter has said.
Cohn said he read about the latest probe in the newspaper.
The SEC's probe into Goldman comes as the U.S. Congress tries to hash out a final bill to revamp the financial system.
Under consideration are proposals to ban banks like Goldman from proprietary trading and ownership of hedge funds and private equity funds as well as measures that could force big banks out of the lucrative derivatives business.
AMBIGUITY IN VOLCKER'S RULE
Cohn said the proposal by former Federal Reserve Chairman Paul Volcker to prohibit proprietary trading was unclear in certain areas.
Definitions in the Volcker rule are not clear. When they talk about proprietary trading, what is proprietary trading? When they talk about private equity, do they mean private equity or do they mean debt funds? said Cohn. These things are still quite ambiguous at this point.
When asked if the Volcker rules could force Goldman to divest its real estate business, Cohn said anything is possible.
A select group of lawmakers will start hammering out the final financial regulation bill later on Thursday. They must decide whether to include a version of the Volcker rule and the derivatives measure proposed by Senator Blanche Lincoln, a Democrat from Arkansas.
In an attempt to get banks in the business of banking, Lincoln wants to force banks to choose between their over-the-counter derivatives desks and access to the Federal Reserve's emergency funds and other federal protections.
Cohn said Lincoln's plan had issues. But that he understood some of her intentions.
BEWARE OF REGULATORY ARBITRAGE
The European Union is also trying to overhaul its financial system after the 2008 financial crisis exposed gaps in regulation. Although the United States and the European Union agree that there must be higher capital standards for banks, the two economies are taking different approaches in a number of other areas of the financial market.
They differ on how to further safeguard the financial system and whether to clamp down on banks' speculative activities among other things.
Cohn said he shares concerns about so-called regulatory arbitrage.
To the extent that you have a regulatory environment in a country that is significantly different than a regulatory environment in another country, the markets are efficient, clients are efficient, the business will migrate to those areas where it can efficiently be done, he said.
(Reporting by Jonathan Spicer and Rachelle Younglai; Editing by Jan Paschal and Theodore d'Afflisio)