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EU finance officials reject Trump’s undermining of post-crisis financial regulation

US President Trump has been seeking to soften or repeal parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act to allow financial institutions more freedom in their operations. One of the questions raised at a recent workshop for European finance leaders was whether the EU should be thinking about making similar moves to ease regulatory control over its financial institutions.

The idea of trying to mirror the US movement to dismantle or weaken parts of important post-crisis financial sector regulation is not going to happen on this side of the Atlantic, according to EU financial officials, speaking at the workshop on financial regulation organised by Euractiv, in which the current challenges and the way forward in regulating financial services were discussed.

Why Dodd-Frank won't be dismantled

There is still broad consensus among Europe's financial regulators that the package of rules that were adopted after the 2008 crisis are still valid, effective and needed. Those regulations include the EU Capital Requirements Directive IV (CRD IV) and those with global overreach, such as Basel III. Wim Mijs, CEO of the European Banking Federation (EBF) said he supports these regulations but acknowledges the need to review them, which he says is happening. Mijs also cast some doubt on just how far Trump will be able to go in dismantling Dodd-Frank: “They are looking at the rules as they see fit but I believe they won't have a parliamentary majority to really dismantle Dodd-Frank.”

Another participant in the workshop, MEP Brian Hayes, a member of the European Parliament's ECON committee, was of a similar opinion to Mr Mijs, emphasising that the EU legislation on capital requirements has put in place solid building blocks to ensure future financial stability in Europe. He also highlighted the difficulty the Trump administration is likely to face in getting the Financial Choice Act enacted.

No return to light-touch regulation

Hayes said Europe's financial sector regulators would not change their focus, irrespective of what happens in the US. He acknowledged there is a place for tweaking and improving Europe's financial regulation – but not for undermining it, as Trump seeks to do in the US. He added: “Ultimately we have to work with the US administration and with Congress to make sure they're aware of their international obligations. The new financial regulatory peace post-crisis is not going to be handed up to anyone – it's too important for financial stability in Europe, too important to our growth agenda in Europe and too important to ordinary people's lives that we never go back to light-touch regulation.”

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