Global regulatory cooperation under threat: Tension over US bank capital proposals

The last 2 or 3 years have seen growing tension between US regulators, overseas multinational financial institutions and regulators in other jurisdictions. Current US proposals to change the treatment of foreign-owned banking operations are likely to impose substantial additional regulatory capital requirements, and carry serious implications for funding and liquidity in US markets. More fundamentally, US unilateralism is increasingly threatening to disrupt international regulatory cooperation

International concern is growing over the Federal Reserve’s actions, and at the potential for unilateral protectionism it may represent. Michel Barnier, the current European Commissioner for Internal Market and Services, wrote in April 2013 to Ben Bernanke, Chairman of the Federal Reserve, expressing his concern.⁸ He reiterated the G20 position – which the US fully endorsed at the time – that the global nature of financial markets and the lessons drawn from the recent crisis clearly call for a globally-coordinated response. He pointed out that the Federal Reserve’s current proposals: “seem to be in substantial contradiction to the global regulatory convergence and could have a negative impact on the implementation of Basel II, jeopardizing and/or delaying the process.” ...more