The proposed easing of banking supervision in the United States is raising concerns within European financial institutions, with Deutsche Bank warning of potential competitive disadvantages for European lenders. Paul Maley, interim head of Deutsche Bank’s Americas operations, cautioned in Washington that the EU must respond to the shift in US regulatory policy to avoid placing European banks at a disadvantage.
Maley highlighted a nascent trend among large, multinational US banks already loosening credit standards as interest rates in the dollar zone decline. He suggested that further regulatory easing, allowing US banks to utilize their balance sheets more efficiently across various business segments, would significantly alter the competitive landscape, initially within the US and subsequently on a global scale.
Data from Alvarez and Marsal indicates that US banks could be required to hold an average of 15 percent less equity as a safety buffer due to the planned deregulation, a reduction that analysts believe will fuel a more aggressive lending environment.
The anxieties extend beyond Deutsche Bank. Bettina Orlopp, CEO of Commerzbank, has similarly called for a reassessment of European regulatory approaches, particularly concerning the implementation of globally agreed-upon Basel III capital rules. Orlopp emphasized the need to avoid introducing additional regulations while also advocating for deregulation in select areas, moving beyond mere streamlining of existing frameworks.
The emerging discrepancy in regulatory stringency between the US and Europe poses a complex challenge for policymakers. While proponents of deregulation argue it fosters economic growth and competitiveness, critics warn of increased systemic risk and a potential return to the conditions that precipitated the 2008 financial crisis. The situation underscores the need for transatlantic dialogue and a careful evaluation of the long-term implications of diverging regulatory paths in the global financial system.
