Deregulation in the United States and United Kingdom is handing big banks a huge new growth lever, while rivals in the European Union and Switzerland brace for tougher rules. Recent changes have freed up about 1.3 trillion dollars in extra balance‑sheet capacity for US and UK lenders, just as policymakers on the continent push capital ratios higher.
US And UK Banks Gain Room To Grow
According to FT, US and UK supervisors have relaxed the treatment of certain safe assets and central bank reserves toward key capital constraints. As a result, large banks can lend more, hold more government bonds, and scale their repo operations without hitting regulatory ceilings as quickly as before. One research note summed it up by saying the changes “unlock roughly $1.3 trillion in additional lending and trading capacity” for top‑tier institutions.
Investment strategists argue that this shift could boost returns at major US and UK banks, especially those with strong deposit bases and investment banking arms. Franklin Templeton, for example, has told clients that deregulation “creates a new paradigm” in which well‑capitalized banks face fewer binding constraints on balance‑sheet growth than their European peers.
JPMorgan Private Bank has likewise flagged bank deregulation as a key Washington theme that could “reshape bank balance sheets and credit supply” over the next few years.
EU And Swiss Banks Face Stricter Capital Rules
Over on the other side of the Atlantic, authorities are going the other way. The European Union is rolling out new revisions to its Capital Requirements Regulation, making it tougher for banks to operate with smaller capital buffers, introducing additional buffers, and requiring more granular reporting on climate and other risks. Existing European banking studies already indicate that significant EU banks have, on average, higher risk-weighted capital ratios than many of their US peers, reflecting a more conservative supervisory approach.
Switzerland is going even further after Credit Suisse’s collapse. The Federal Council has proposed rules that would require systemically important banks to fully back their foreign subsidiaries with Common Equity Tier 1 capital, a move UBS says could require around 24 billion dollars in additional equity. The Swiss Bankers Association warns that tighter capital rules “lead to significant competitive disadvantages for the Swiss financial center” and could mean more expensive credit or less lending at home.
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