The Transatlantic Regulation Rift
European governments have seemingly concluded that hosting large, risky, and volatile financial firms and markets is not worth it, while the US administration still regards the financial sector as a comparative advantage for New York. Which side has made the wiser choice?
LONDON – US President Donald Trump made his intentions on financial regulation clear from the very start of his administration. He issued an executive order requiring that, for every new regulation imposed, at least two should be targeted for repeal. No such deregulatory zeal is evident in Europe.
The Economic Growth, Regulatory Relief, and Consumer Protection Act, signed by Trump in May 2018, has, in practice, emphasized the second part of its title over the third. According to a set of regulatory principles issued by the administration, regulators must consider the competitiveness of US firms and advance American interests in international financial forums. The Treasury was instructed to produce four reports, covering banks, capital markets, asset management and insurance, and non-banks and fintech, to show how the principles could be realized through a variety of deregulatory initiatives. All four reports have now been issued.
For a time, this political activity seemed to be rhetorical, with few significant changes to the regime affecting big banks. The early focus was on relieving smaller lenders of some of the burdens of reporting and capital regulation – rules that arguably were not well designed for them.