EU Urged to Resist US Pressure on Megabank Regulation

The European Union (EU) is currently debating whether to ease capital requirements on megabanks in response to the US's deregulatory drive. However, research from the Peterson Institute for International Economics suggests that EU policymakers should prioritize completing the banking union and integrating macroprudential buffers at the European Central Bank instead.

According to the study, US megabanks had stricter capital requirements than their EU counterparts as of 2024. Although the Trump administration's deregulatory efforts may have relaxed these rules slightly by 2025, they did not undercut those in the EU. As a result, there is no justification for the EU to ease its own regulations.

The authors argue that EU policymakers should focus on addressing banking policy fragmentation along national lines within the euro area. This would involve completing the banking union and integrating decision-making on macroprudential buffers at the European Central Bank, making the banking policy framework simpler and more predictable.