(Bloomberg) — Slawomir Krupa, chief executive officer of France’s Societe Generale SA, keeps a magnet on his desk. “Stop Basel Endgame!” it proclaims, reminding him daily of the most effective bank lobbying campaign in history.
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Frustratingly for Krupa — also president of the European Banking Federation — it was won across the pond.
US rivals were rewarded for their billboards and TV ads with an abrupt reversal of a threatened 16% increase in capital requirements, measures that some estimated would carry a $160 billion cost.
Wall Street also enjoyed less intrusive supervision and revisions to other measures, as President Donald Trump’s administration vowed to unshackle banks from what it sees as excessive curbs introduced after the 2008 financial crash.
For Krupa and his fellow Europeans, the winds of deregulation have taken too long to blow over the Atlantic. Now though, the region’s lenders are hopeful after the European Commission last month promised to tackle some of their biggest complaints.
“It’s a resolute step in the right direction for the first time in years,” said Krupa of the proposals, which could release hundreds of billions of euros in capital and liquidity trapped by national ring-fencing and have opened the door for changes in parts of the global capital accord most fiercely resisted by local lenders.
The package from the European Union’s executive arm was propelled by politicians and banks clamoring for action to preserve the “global level playing field,” most pressingly vis a vis US rivals who have long eaten their lunch, and now have the added tailwind from Trump’s rule-cutting agenda.
But while their political masters may be onside, European regulators — wary of future financial crises and the ensuing economic misery — are much less open to a potential rollback. This is setting the scene for global clashes over how to responsibly ease existing rules, and whether to introduce new measures to deal with emerging threats like artificial intelligence and private markets.
“It’s definitely harder — and a lot lot harder than it’s ever been — to make changes and agree on things,” said Neil Esho, who until March
was secretary general of the Basel Committee on Banking Supervision, where the Basel III capital rules now being contested were hammered out.
‘Fight Back’
By the time Krupa took over at the EBF in February 2025, the US industry’s onslaught against regulation was already in full swing.
“It’s time to fight back,” Jamie Dimon, CEO of JPMorgan Chase & Co, declared in October 2024, as US banks protested with increasing intensity what they described as regulatory overreach.
Europe, meanwhile, was fixated on two landmark reports that called out the region’s financing and growth challenges from former ECB President Mario Draghi and former Italian premier Enrico Letta, topics seized on by banks to demand “competitiveness” reforms so they could lend more.
The most concrete result thus far of the European push has been the EU’s deferral of a portion of the new global rules, known as the Fundamental Review of the Trading Book or FRTB, until there is clarity on the US’s own plans. The FRTB increases capital requirements for trading, an area where Europe’s banks compete directly with Wall Street’s and so would have been disadvantaged by early adoption.
“I think we lost two years,” said Krupa, who rose to the top of SocGen in 2023, referring to European banks’ efforts to achieve meaningful reform. In public appearances, he and other CEOs have seemed deeply frustrated at the slow progress. European banks continue to trade at a discount to US lenders, even though the gap has narrowed.
The direction of travel in the latest EU package is not as dramatic as the easing in the US, or even the UK, and does not follow the same playbook by directly addressing capital levels. But lobbyists view the American actions as a key catalyst for change.
The 27-nation EU doesn’t want to be seen as imitating the US. Rather, it presents its goal as independently taking action to make European banking more efficient and giving lenders access to economies of scale so they can compete globally.
At Deutsche Bank AG’s earnings day last month, CEO Christian Sewing said he was “encouraged” by the increasing focus on “simplification and growth.” Wim Mijs, who runs the EBF day to day, describes the EU initiative as a “breakthrough” and said he was particularly surprised, and pleased, to see Europe open the door for changes on the output floor, a key and problematic part of the global banking package.
Introduced to prevent banks from gaming internal models to cut their capital charges, the output floor was a central piece of the final Basel rules which are now being implemented — and resisted — globally.
Earlier this year, the US announced it would not implement the rule. The move had negligible impact domestically, since US banks already can’t use internal models to calculate the risk of their loan book.
The main effect was clearing the way for European banks, who are much more impacted by the measure, to argue for a review of the rule in the spirit of a level playing field, a review the Brussels-based commission has now granted.
A big obstacle remains the European Central Bank, where officials believe the output floor should stay in place as it is, according to people familiar with the ECB’s thinking, who spoke on condition of anonymity.
“We’ll have to also have a proper dialog with our supervisors, and we need to find the right balance,” Maria Luis Albuquerque, the EU financial services commissioner in charge of delivering the plan, told Bloomberg. The ECB declined to comment.
Europe’s need to reconcile reluctant supervisors and member states with divergent interests is part of the reason that the region’s banking stocks did not rally in response to the commission announcement.
“It’s all about certainty, because in the US when there is a speech by Miki Bowman everyone believes what she says, and especially the market,” Mijs said, referring to the Federal Reserve’s top supervisor.
‘Super Sad’
As European banks push politicians to catch up with the US, reforms to the American financial industry keep coming, mirroring the broader Trumpian deregulation of everything from technology to fossil fuels and cars.
That deregulatory spirit sweeping through finance is unnerving some senior central bankers and watchdogs in Europe who, speaking on condition of anonymity, told Bloomberg the US approach had spilled over into fraught meetings at international forums such as the Basel Committee.
According to one veteran European policymaker, in his near two decades at the global regulatory table, he’s never seen a bigger divide in how officials in the US and Europe view threats to stability in the financial sector. Several expressed concerns about what they perceive as the US’s complacency around risks — particularly in banking, AI and credit — and its domestic policies, including paring back supervision.
The Fed declined to comment as did the Basel Committee. US officials have publicly said they do not see a systemic threat from private credit but they are nonetheless seeking additional information on banks’ exposure to the sector. It has also identified cyber risk as a supervisory priority across banks.
“It is hard to judge the changes to Fed supervision, but the ECB, Bank of England and others are going to have to assess whether supervision is becoming inadequate,” said Paul Tucker, a former deputy governor at the Bank of England, who is now a research fellow at Harvard University.
Plans by the Fed to reform key liquidity rules — potentially enabling banks to ultimately move money away from low yielding assets like Treasuries into riskier assets — in particular sound like a “muddled mistake,” Tucker said.
The proposals are not yet finalized; in June, Bowman told the House Financial Services Committee the objective was to ensure “that banks can meet obligations under stress while maintaining the ability to provide liquidity to customers and communities.”
Meanwhile, US officials have publicly stressed the need to “modernize” the global regulatory framework, a phrase that some European officials see as a byword for “deregulate,” according to people with knowledge of their thinking.
Privately, the US has also questioned the need for financial regulators to branch into new topics, people familiar with the discussions said.
Former Basel official Esho said he doesn’t “expect anything of great substance to change if it needs international agreement.”
In Senate testimony last February, Bowman called out what she described as long held “governance concerns” about the Basel Committee, including “a growing concentration and reduced rotation of leadership across jurisdictions.”
The US remains an enthusiastic participant in bilateral and trilateral meetings with peers; still Esho worries that it could be “difficult” to ensure smooth international coordination in times of crisis.
“There is definitely a lack of trust,” said Esho, describing how the US position is now seen as coming directly from the Treasury, a new development. “I think some have the view that you can compromise everything else, but not monetary policy independence. I understand that, but it’s super sad.”
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