The US Federal Reserve’s decision to ease regulatory requirements on large banks is increasing the pressure on Europe to act. While the US and the UK are reviewing and making targeted adjustments to their regulations, the European Union must not fall behind.
The Federal Reserve has explicitly pointed out that steadily rising capital requirements could place an increasing strain on the financing of the US economy. Both the Federal Reserve and UK banking regulators are therefore placing greater emphasis on banks’ competitiveness in their regulatory policies. The reform package now adopted in the US will, above all, strengthen the competitiveness of the US financial system on the international stage.
Heiner Herkenhoff, CEO of the Association of German Banks said, “The message for Europe is clear: Our economy needs efficient and internationally competitive banks. Any regulatory relief measure granted to financial institutions outside Europe alters the landscape of global competition.”
The European Commission should now take decisive action on the competitiveness of the European banking sector, Herkenhoff added. Under the current plans, the capital requirements for domestic banks would continue to rise year on year. The European Commission must put a stop this development as quickly as possible. Proposals to achieve this are already on the table: Targeted ‘quick fixes’ could bring about noticeable improvements in the short term. Among other things, the Commission could extend current EU transitional arrangements. This would be a relatively simple measure with a significant impact on the competitiveness of European banks.
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Juliane Weiß
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