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Rules that force international banks operating in the US to hold capital in the country put European banks at a disadvantage to their American competitors, according to Deutsche Bank AG co-Chief Executive Officer Anshu Jain.
"For those organisations which have large US operations but are operating out of Europe, there's a profound asymmetry," Jain said at a conference in Frankfurt on Tuesday. European banks are subject to rules "which require us to hold capital and create subsidiaries in the US".
The US is erecting walls around its financial system to stop local units of foreign lenders from harming the economy if their parent runs up losses. The Federal Reserve approved new standards last February that will force the largest foreign firms to consolidate US operations into one subsidiary and abide by the same capital and liquidity minimums as domestic peers.
European banks also lack the support of their domestic regulators in offering investment banking services, Deutsche Bank supervisory board Chairman Paul Achleitner said earlier Tuesday.
Jain said that he doesn't advocate US banks should be subjected to similar regulation in the European Union as the US units of Deutsche Bank and other European lenders. He said he would have liked the financial services industry to feature in talks over a trade pact between the the US and the EU.
Stricter European rules for banks active on capital markets mean investment banking runs the risk of going the way of the Internet, which is dominated by U.S. companies, Achleitner said at a different conference in Frankfurt.
He didn't specify the regulation he considers harmful. The EU is working on new rules that stretch from efforts to split some investment banking businesses from banks' deposit-taking units to enhancing bond market transparency.
That works against European lawmakers' efforts to push companies to seek more funding via stock and bond sales as banks shrink their balance sheet to lift capital levels, Achleitner said. "Why are we so focused on pushing all European banks out of capital markets activities and leaving it all to others?" he said.
