Europe’s banks push to match US deregulation wave

European banking executives are escalating their campaign for regulatory relief after the European Commission adopted a landmark communication on July 17 aimed at boosting the competitiveness of the EU banking sector. The push comes as U.S. regulators have proposed cutting capital requirements for the largest American banks by roughly 4.8%, a move that European lenders say deepens an already widening transatlantic gap.finance.yahoo+2

A Transatlantic Gap Widens

Slawomir Krupa, chief executive of Societe Generale and president of the European Banking Federation, called the Commission's proposals "a resolute step in the right direction for the first time in years". The package could release hundreds of billions of euros in capital and liquidity trapped by national ring-fencing rules, while opening the door for changes to contested parts of the global Basel capital accord.finance.yahoo

The urgency was fueled by moves in Washington. In March, the Federal Reserve, FDIC, and OCC jointly proposed overhauling U.S. bank capital rules, replacing the 2023 Basel III Endgame proposal with a framework estimated to provide $87.7 billion in system-wide capital relief. According to Alvarez & Marsal, the broader deregulatory push could unlock approximately $2.5 trillion in additional asset capacity for U.S. banks. JPMorgan Chase ↘ 0.02%, Bank of America ↗ 0.23%, and Goldman Sachs The Goldman Sachs Group, Inc. ↗ 0.02% all reported strong second-quarter earnings, benefiting from the lighter regulatory environment.cryptobriefing+2

Europe's Cautious Response

The Commission's communication targets several longstanding complaints: simplifying the capital framework, reducing reporting burdens currently estimated at €11.2 billion annually, and addressing national "gold-plating" that fragments the single market. It also deferred the Fundamental Review of the Trading Book, which increases capital requirements for trading — an area where European banks compete directly with Wall Street.freshfields+3

Deutsche Bank ↘ 0.99% CEO Christian Sewing said he was "encouraged" by the increasing focus on "simplification and growth". Santander Banco Santander, S.A. ↗ 0.27% Executive Chair Ana Botín has been among the most vocal proponents, warning that Europe's regulatory burden is holding back economic growth.finance.yahoo+1

Regulators Push Back

Not everyone shares the enthusiasm. The European Central Bank remains wary, with officials insisting that key safeguards like the output floor — designed to prevent banks from gaming internal models — should remain intact. Paul Tucker, former deputy governor of the Bank of England, warned that Fed proposals to reform liquidity rules sounded like a "muddled mistake".finance.yahoo

Neil Esho, who served as secretary general of the Basel Committee on Banking Supervision until March, described a growing divide. "There is definitely a lack of trust," he said, noting that the U.S. position is now seen as coming directly from the Treasury.finance.yahoo