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European lenders are seeking a relaxation of rules around stress tests and capital requirements, according to senior bankers working on US policy issues, on the basis that their US operations are of a similar size to the mid-tier US banks which were given relief under legislation signed by President Donald Trump.
US lenders with between $50bn and $250bn were granted a significant loosening of the regulations imposed by the Dodd-Frank reforms, subject to the discretion of the Federal Reserve.
European banks which fall into that category include Deutsche Bank, which had $188bn of assets in its US holding company as of March 31; Credit Suisse, with $99bn; and Barclays, with assets of $92bn. Société Générale, Natixis, Crédit Agricole and BNP Paribas each have between $60bn and $83bn of assets. Big Japanese and Canadian banks are also affected.
Seven Republican senators have weighed in on behalf of the foreign banks. In an August letter to Randal Quarles, the Federal Reserve’s vice-chairman for Supervision, they argued that international bank holding companies “should receive comparable regulatory treatment of US [banks] of similar size and risk profile”.
The senators raised the spectre of foreign retaliation for unequal treatment, cautioning that the supervision of foreign banks “has important implications . . . for how other regulators treat the international operations of US banks operating abroad”.
A European bank representative said that the possibility of retaliation was “an important talking point” for both foreign banks and US banks making their case. A second banker pointed out that the EU’s rules requiring foreign banks to set up holding companies was a direct reprisal for earlier US rules requiring foreign banks to do the same thing.
Full article on Financial Times (subscription required)