Regulation: Battle lines drawn across the Atlantic
European banks will seek to gain an advantage if global regulations can be agreed.
Sixteen months after the collapse of Lehman Brothers, and the near failure of the financial system, the world’s governments and financial regulators are still some way from agreeing the inevitable new set of rules that will shape the landscape of financial markets and, hopefully, prevent crises of such magnitude in the future.
Finding common ground will not be easy. European banks still complain about the failure of their US counterparts to institute Basle I. US banks counter that European banks are relatively over-leveraged. Each will seek to gain an advantage.
European banks are in no mood, however, to lay down to their US competitors. An off-the-record discussion with one of Europe’s senior bankers threw light on how the battleground might look.
The banker told Euromoney: "In Europe the banking system has passed through the crisis much better than our US competitors. Why? Probably because we have had better risk control and better risk management. My feeling is that large universal banks with big retail and commercial banking components have a better culture of risk management from the point of view both of credit intermediation and liquidity risk."
He continues: "That is very different from classic investment banking in the US which has less of a culture of risk managing credit portfolios for the long term but instead considers that, at any moment, it is always possible to derive a market value for any financial asset.