The degree of relaxation of banking industry regulation in the EU is expected to be difficult to match with that of the United States. Industry executives are concerned about inadequate competitiveness.

EU banking executives are preparing to face disappointing regulatory reform measures in the region, which will lead to EU banks being less competitive compared to US banks, which are about to undergo regulatory relaxation. A working group composed of senior Eurozone officials will submit proposals to the European Central Bank by the end of the year regarding bank capital buffers and other efficiency measures. This proposal is likely to be a key reference for a major report on the EU banking industry that the European Commission is expected to release in 2026. Bankers and lobbyists familiar with the situation have revealed that regulators are more focused on improving the efficiency of capital buffers rather than reducing capital requirements, which means that the established reform measures in the EU will have limited substantive effects. This outcome is undoubtedly disappointing for EU banking executives. Consulting firm Alvarez & Marsal pointed out that banks in the region believe that they are at a competitive disadvantage compared to their Wall Street peers in light of the possibility of the Trump administration relaxing capital requirements, and that the EU reforms may have a "neutral" or even negative impact on the banking industry. It has been reported that the Federal Reserve and other banking regulators have recently reached a consensus on a final proposal to relax key capital requirements. Last month's reports indicated that the Federal Reserve has shown other US regulators a revised version of the Basel III endgame rule, which would significantly relax capital requirements for large Wall Street banks. Some officials estimate that the new proposal would reduce the overall capital requirements for most large banks by 3% to 7%, a number much lower than the 19% increase proposed in 2023, as well as below the 9% proposed in last year's compromise version. Nicolas Namias, CEO of the French BPCE banking group, recently admitted in an interview: "This agenda cannot just remain at the level of administrative simplification as it is now; we need to enhance Europe's financing capacity - we now need financial sovereignty more than ever." According to reports, a proposal by the German side within the working group to thoroughly simplify the "capital stack" (i.e. multiple layers of capital buffers set by different regulatory bodies for banks) has sparked controversy among central bank officials. Some French companies are concerned that this could increase their equity financing requirements, as the deeply subordinated bonds they use can only be counted as another type of financial reserve. Nicolas Namias emphasized that further increasing capital requirements "could ultimately offset Europe's financing capability." Focus on small and medium-sized banks Luis de Guindos, Vice President of the European Central Bank, who leads the working group, previously stated that these measures will have a neutral impact on overall bank capital levels. He stated last month that the group "will make clear recommendations on capital stacking," and also revealed that officials will suggest reducing the burden on banks in submitting data to various regulatory bodies. Several senior executives of large European banks expect that the simplification measures will mainly benefit small and medium-sized banks with simpler business structures. KBW analyst Andrew Stimpson and his team wrote in a report on November 14th: "We have low expectations for the actual outcomes of the working group, and still anticipate that the regulatory easing will be more favorable towards US banks than towards Europe. But if the burden of banking policies can be significantly reduced, it will be an important catalyst for pushing banking valuations to new highs." Exemptions sought European bankers are also taking this opportunity to request that local regulators weaken their own version of Basel III (which is gradually being implemented until 2033). Bank executives, including James von Moltke, CFO of Deutsche Bank, have called for the temporary relaxation of rules to be made permanent. Regulatory authorities in EU countries have rejected this, stating that efforts to simplify rules must never turn into relaxed regulations that could trigger a new financial crisis. Nathalie Aufauvre, Secretary General of the French banking regulator ACPR, pointed out: "The cost of a banking crisis is extremely high." She dismissed claims that regulations hinder the flow of credit to the economy, stating that the situation in France in recent years did not confirm this view. European banking institutions argue that their more conservative stance compared to the US will weaken their competitiveness. They are pushing for regulators to formally commit to balancing financial resilience with industry competitiveness. Ana Botin, Executive Chairman of Santander Bank, bluntly stated earlier this month: "Americans can openly say 'relaxing regulations,' but we in Europe avoid using that term and only say 'simplify' - these two are completely different things."