Following Silicon Valley Bank and Credit Suisse going into distress, the issue of bank regulation is gaining focus in Europe as well. In Handelsblatt, our Policy Fellow Sebastian Mack argues in favour of strict banking regulations in the EU.
After the financial crisis of 2007/2008, central banks and supervisory authorities in the Basel Committee on Banking Supervision agreed on higher requirements regarding capital and liquidity.
While the EU has since applied these stricter rules to all banks, in the U.S. they only apply in full to the largest financial institutions. Sebastian Mack explains in Handelsblatt: "In recent years, European banks have always complained that they were at a disadvantage compared to U.S. banks because of the strict capital requirements." The predicament of the mid-sized Silicon Valley Bank in the U.S. is now proving proponents of looser EU rules wrong: "Hopefully, we won't hear that argument again now," says Mack.
Instead, Mack calls for consistent implementation of even the last part of the internationally agreed Basel III banking reforms in the EU. "What is being discussed in Brussels is full of new exceptions. We should fully implement the Basel agreement," Mack says. "The financial system is still very fragile."
Read the full article (in German) here.