In the Biden era, big U.S. banks are yearning for a bit of European-style regulation. The grass is looking greener across the pond as the EU prepares to implement bank capital capital rules that France, Germany and other countries have watered down to shield their lenders from regulatory burdens. “The EU is applying the requirements that it thinks are beneficial to its economy and its banks,” Financial Services Forum president and CEO Kevin Fromer told MM. As your host reports in a new piece, it’s a disparity that you’ll hear more about in Washington over the coming months. U.S. regulators are preparing to raise bank capital requirements and are facing off against industry groups and Hill allies who want to pare back the plans. The U.S. approach is tougher than Europe's in key ways, and so the disconnect is set to become a key talking point by the opposition. Fromer, who represents JPMorgan, Bank of America and six other U.S. megabanks, is warning of “competitive inequities.” The rift is emerging despite the fact that the U.S. and EU are working from the same global mandate — international standards hashed out at the Basel Committee on Banking Supervision in the wake of the 2008 crisis. Regulators have been trying to beef up bank capital levels to ensure that lenders have funding to operate through economic downturns without needing a new round of bailouts. It will be tough for U.S. banks to argue that they’re going to be at a major disadvantage against EU competitors. Former FDIC Chair Sheila Bair said in an interview that a number of European banks were powerhouses prior to the global financial crisis but that now “a lot of that competition is gone.” “It’s more about, why are they doing one thing and we’re doing the opposite?” said Bank Policy Institute president and CEO Greg Baer, whose group is launching an ad campaign to fight the U.S. rules. “Especially when what they’re doing is the right thing?” Senate Banking Chair Sherrod Brown is pushing back against the lobbying effort. He told MM that stronger rules since the 2008 crisis have allowed the largest U.S. banks to outpace their foreign counterparts because “a safe U.S. banking system goes hand in hand with a competitive one.” It’s unclear if complaints about international incongruity will get traction with officials at the Federal Reserve, FDIC and the OCC. “Sitting on the Basel Committee as the U.S. regulators do, they are mindful of collegial international cooperation in part because they fear the race to the bottom resulting from a world without some cross-border norms,” Federal Financial Analytics managing partner Karen Petrou said. “But they well know that Basel sets the bar; lots of nations then do the limbo.” It’s Wednesday (even if it feels like Tuesday) — What are we missing? Send tips: Zach Warmbrodt, Sam Sutton.
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