Germany, France, and Italy have urged the European Union to ease its grip on financial rulemaking, prioritizing the competitiveness of its banking sector instead. In a joint letter addressed to John Berrigan, the director general for financial services, the three economic powerhouses outlined their concerns, marking the latest move in a global shift towards prioritizing economic growth over strict regulation, Bloomberg reports.
The trio specifically called for a pause on new financial regulations, arguing that current rules have already created a disadvantage for European banks compared to their counterparts in other major jurisdictions. They emphasized the need for a “level playing field” and urged the incoming European Commission to “refrain from launching new large-scale initiatives” in the financial sphere for the foreseeable future.
This push for a lighter regulatory touch comes amidst a growing backlash against the EU’s propensity to regulate. French President Emmanuel Macron recently warned that excessive rulemaking could cripple the bloc’s competitiveness. The US has already significantly scaled back its implementation of the Basel Endgame, the latest package of post-crisis banking reforms, while the UK’s final version of these rules was widely welcomed by banks as a more favorable alternative to the original proposals.
The joint letter stresses the need for a “stronger emphasis on the competitiveness of the financial sector, particularly banking.” The three countries propose a range of specific changes, including revising the proposed adoption of capital reforms affecting banks’ trading books to avoid disadvantaging European lenders if the US adopts divergent rules. They also advocate for streamlining regulations to ease the administrative burden on banks and introduce greater flexibility in the rule-making process.
The call for easing regulations has been met with resistance from key global regulators. These figures argue that the shift away from regulation in favor of growth is a dangerous trend, warning that robust regimes are necessary to prevent a repeat of the financial crisis. They highlight the emergence of new risks, such as turmoil in the Middle East and the potential for a shadow banking blow-up, that necessitate continued regulatory vigilance.
Despite this pushback, the letter reflects a growing sentiment among policymakers that economic growth must be prioritized. The call comes just weeks after former European Central Bank president Mario Draghi published a report outlining ways to boost the EU’s growth. The European Commission is already scheduled to review the banking system by the end of 2028, but Germany, France, and Italy have requested an interim report on banking industry competitiveness “to be finalized long before” that deadline.
