U.S. financial bill puts Europe behind the curve

* U.S. bill includes oversight, windup authority

* Europe still haggling over supervision, consumer issues

* Europe’s banks feel the pressure

By Ben Berkowitz

AMSTERDAM, July 16 (BestGrowthStock) – The new financial regulation
bill passed in the U.S. Senate on Thursday will put Europe
firmly on the back foot, leaving it for now without the kind of
strong regulatory and consumer protection regimes necessary to
prevent another global banking crisis.

It is also likely to increase pressure on European banks
that do business in the United States, particularly in the
retail space, adding complex new rules with which to comply and
new costs they will have to pass on to consumers.

The so-called “FinReg” measure will establish an oversight
council to monitor risk, set up liquidation powers for large
firms and restrict leverage and proprietary trading.

It is easily the strictest regulation of the financial
sector since the 1930s. [ID:nN14165937]

On the other hand, not only can European leaders not agree
on the framework of a new financial supervision regime, they
have yet to even pin down when the talks will resume or how much
power the new regulators will have, leaving a gaping hole in the
system. [ID:nLDE66D1MA]

“You only need to look at the G20 declaration in Toronto to
show that there is a very clear agenda here of reining in
institutions, bringing in much more prudent, much more cautious
regulation,” said Simon Morris, a partner in the financial
services department at law firm CMS Cameron McKenna in London.

“Either Europe will catch up very soon or Europe will do
something equally restrictive in a different field which has the
same net effect.”

To be sure, Europe is making efforts to bring a regulatory
framework to bear. On Monday the European Commission introduced
proposals to codify and improve national guarantee schemes for
bank deposits and insurance policies, among other measures
designed to protect consumers. [ID:nLDE66B0G4]

But as with most radical changes in the European Union, the
decision will ultimately rest with the EU’s 27 member states and
its parliament, meaning any consensus is likely to take time.

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Click here for more stories on:

U.S. regulatory overhaul [ID:nFINREG]

Global regulatory changes [ID:nLDE64915B]

European bank stress tests [ID:nLDE6601T6]

Breakingviews column [ID:nN15223056]

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BANKS FEAR THE WORST
European bank shares eased broadly on Friday as investors
and analysts tried to ascertain just how deeply the new U.S.
rules would cut.

Dutch brokerage SNS Securities said it was not that worried
about the bill’s impact on matters like credit card rates or
higher capital buffers. But there were concerns about what the
bill would mean for retail banking and mortgage operations.
“The reform bill is introduced in an economic uncertain time
frame. Therefore, it must be prevented that implementation will
hamper economic growth,” SNS analysts said in a research note.

European banks with substantial U.S. retail operations like
Royal Bank of Scotland (RBS.L: ), Santander (SAN.MC: ), BBVA
(BBVA.MC: ), ING (ING.AS: ) and BNP Paribas (BNPP.PA: ) could feel the
pinch in particular. They own five of the 30 largest U.S. banks
by deposits.
They are also likely to be faced with deep-seated confusion
among their customers about what the changes mean.

An Ipsos poll released on Thursday found 71 percent of
Americans had either not heard of the reform bill or had heard
of it but had no idea what it entailed.

But there was at least one confident note on Friday about
something that will take much more precedence in the short term:
the head of the International Monetary Fund, Dominique
Strauss-Kahn, said all the major European banks have enough
capital to pass ongoing stress tests. [ID:nLDE66F0Z6]
(Additional reporting by Kenneth Grierson in London; Editing by
Michael Shields)

U.S. financial bill puts Europe behind the curve