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German Banking Association Criticizes U.S. Foreign Banks Capital Level Requirements

The German banking association, BdB, said on Monday that a push by U.S. regulators to tighten oversight of foreign banks would put European banks at a competitive disadvantage internationally.

In December, Federal Reserve Board Governor Daniel Tarullo said foreign banks should be required to hold as much capital as their U.S. counterparts, regardless of how their overseas parent companies are funded – a move that could trigger competition among regulators requiring banks to hold different levels of capital.

“If other countries followed the U.S. example, it would result in a dangerous fragmentation of financial markets. Different rules and standards would make markets more unstable and inefficient,” BdB managing director Michael Kemmer said in a statement.

“These new rules amount to a clear disadvantage when it comes to competing with U.S. banks on a global level.”

The United States has traditionally relied on foreign supervisors to regulate overseas banks and specify appropriate levels of capital, just as U.S. banks operating in the euro zone are judged on their worldwide capital.

The Fed’s measure could be particularly costly for Deutsche Bank, Germany’s flagship lender, and to a lesser degree for Britain’s Barclays Plc, because of their corporate structure.

via Reuters [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza
Alfonso Esparza

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