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The European Union’s financial regulation chief has urged the new US administration not to abandon international cooperation on bank rules, warning that an America First policy risks driving up costs for the sector and harming stability.
Speaking in London, Valdis Dombrovskis, a vice-president of the European Commission, said Europe “is sensitive to talk of unpicking financial legislation which applies to carefully negotiated international standards and rules.”
In a swipe at the Trump administration and its allies in Congress, Mr Dombrovskis said:
It is difficult not to notice when the Chair of the Federal Reserve is criticised for her approach to negotiating international rules and standards, or when an an American president talks about `doing a big number’ on Dodd-Frank.
Urging the US to stay engaged in international fora such as the Basel Committee on Banking Supervision, Mr Dombrovskis warned that divergence would “give financial institutions incentives to engage in regulatory arbitrage…and [potentially] put the whole financial system at risk.”
He also fired a shot across the bows of those in the UK who believe that the City of London will be able to maintain access to the European market after Brexit by using so-called “equivalence” provisions built into EU law.
In the speech, he made clear that using equivalence rules to get access is dependent on the country maintaining standards of regulation and supervision that are as stringent as the EU’s. It is a message that is also relevant for the US, which has negotiated several equivalence agreements with Europe.
“Based on strong international cooperation, the EU has been very open to recognise that our international partners’ rules are equivalent and achieve the same objective as ours,” he said.
“But these findings depend very much on the specific conditions of individual sectors and country [as a whole] at the time when the decisions are made. If these conditions change, we will have to reassess the situation,” he said.