Trump Ignites Overhaul of EU Finance Rules—But Avoid Calling It Deregulation

“Recent moves to weaken and postpone crucial regulatory protections highlight a concerning trend where ‘competitiveness’ is increasingly being used as a justification to erode safeguards designed to mitigate financial risks,” he warned.

With Donald Trump set to return to the White House in weeks, the fate of critical financial rules hangs in the balance, creating a strategic challenge for the EU. | Chip Somodevilla/Getty Images

This issue is particularly pertinent to the implementation of global banking regulations, known as the Basel 3 standards. While the EU, U.K., and other countries have integrated these international standards into their national laws, the U.S. has postponed doing so amid heavy lobbying by the banking sector.

With Trump’s imminent return as U.S. president, the future of Basel 3 in America is now unclear, presenting a difficult choice for the EU. Should the bloc move forward with the implementation of Basel 3 to ensure banking stability, even if that puts U.S. banks at a competitive advantage? Or should the EU soften its stance, potentially contributing to a worldwide relaxation of such standards?

Signals suggest that EU and U.K. regulators may remain committed to their current approach. Both entities have hinted at a coordinated response if the U.S. opts to dismantle the proposals.

Speaking in Paris in November, Villeroy de Galhau advocated for a balanced approach, proposing a simplification of the EU’s regulations without completely undermining global standards. “Simplifying does not mean deregulating,” he emphasized.

The European Commission will be tasked with navigating a delicate balance “between avoiding a race to the bottom and maintaining competitiveness,” said AXA’s de Courtois.

The financial industry, as a whole, appears supportive of such a balanced outcome. While the EU’s upcoming suite of regulations — ranging from the Basel package to reforms in clearing processes and updated cybersecurity rules — may seem burdensome, the industry generally prefers the predictability of established rules over the uncertainty of regulations being scrapped and renegotiated.

One thing is clear: even if regulations are significantly weakened, no one will be eager to label the outcome as outright deregulation.