Trump Deregulation Effect Spreads as EU Moves Toward Banking Regulatory Reform
Nashnova编辑部
The EU last month unveiled a banking reform package to unlock hundreds of billions of euros in trapped capital, directly responding to competitive anxiety after Trump-era deregulation widened the gap — the transatlantic regulatory divide is turning from complaint into policy action.
What did US banks actually win?
US banks ran a billboard-and-TV ad blitz that killed a regulatory plan expected to cost $160 billion in compliance and raise capital requirements by 16%.
This means → American banks didn't just block tighter rules — they gained an even looser regime under Trump, widening their competitive edge.
Société Générale CEO Slawomir Krupa calls it "the most successful banking lobbying campaign in history." A magnet on his desk reads: "End Basel Endgame!"
What does the EU reform package actually address?
The European Commission last month released a reform package pledging to tackle European banks' core complaints. Krupa called it "the first decisive step in the right direction in years."
The plan aims to free up hundreds of billions of euros in capital and liquidity locked by national "ring-fencing" rules — regulations that force banks to keep capital trapped within each country's borders.
The most concrete move: delaying FRTB — the Fundamental Review of the Trading Book, a rule raising capital charges on trading desks. Implementing it ahead of rivals would put European banks at a direct disadvantage against Wall Street.
Why is the "output floor" the key battleground?
The output floor is the centrepiece of Basel III's final rules. It prevents banks from using internal models to game down their capital requirements.
The US announced this year it won't implement the rule. In plain terms = US banks already couldn't use internal models for loan risk, so dropping the rule barely affects them domestically — but it hands Europe a powerful negotiating card.
This reflects a deeper shift: European Banking Federation head Wim Mijs said he was "surprised and pleased" that the EU opened the floor for discussion — previously, this topic was almost untouchable.
Why aren't regulators and politicians on the same page?
Politicians have lined up behind the banks, but European regulators remain wary of loosening rules, fearing the next financial crisis.
Former Basel Committee Secretary General Neil Esho put it bluntly: "Driving change and building consensus is much harder now — harder than it has ever been."
This means → the rift isn't just about easing existing rules. It extends to how to regulate emerging risks like AI and private markets — the seeds of future conflict are already planted.
Can European banks actually close the gap?
Krupa admitted the industry "wasted two years" trying to push for meaningful reform.
The EU package is less aggressive than US or UK deregulation and doesn't directly touch capital levels — but lobbyists see America's move as the critical catalyst for European change.
In plain terms = the direction is right, but whether European bank valuations can genuinely narrow their long-standing discount to US peers depends on how much of this actually gets implemented.
Content is for reference only, not financial advice.