The EU Commissioner responsible for financial markets has
called for financial services to be included in an upcoming
trade deal between the US and Europe.
Michel Barnier, the French politician who has led the EU
market reform programme, used a speech on Friday to promise a
"race to the top" in terms of financial market regulation in
His comments came as he argued in favour of the inclusion of
financial services in the Transatlantic Trade and Investment
The TIIP is currently being negotiated between the US and
the EU and represents potentially the largest trade deal in
history reducing tariffs and boosting transatlantic trade in a
wide range of sectors.
The EU has been pressing for financial services to be
included in the agreement. However, US authorities have
resisted calls citing concerns that the agreement could be used
by US firms to circumvent Dodd-Frank requirements.
However, Barnier said on Friday that "joined-up markets need
joined-up regulation and supervision".
"It would be nothing short of a disaster if our agreements
on broad principles are undermined by the detailed rules and
their implementation being just too different," he said. "This
is why we want to include regulatory cooperation on financial
services in the TTIP.
"I understand there are concerns that including financial
services regulation would lead to the unravelling of the Dodd
Frank Act and deregulation of financial services.
"For us, the objective is the opposite: better and high
ability interoperable regulation. A race to the top, not a race
to the bottom."
His calls were welcomed by financial market associations on
both sides of the Atlantic.
This morning, the Securities Industry and Financial Markets
Association and the Association for Financial Markets in Europe
released a joint statement welcoming the comments.
"SIFMA and AFME believe it is imperative that financial
services regulatory coordination be included as a key component
of TTIP, and we commend Commissioner Barnier for his focus on
"A financial services regulatory framework between the US
and EU would enhance coordination, reduce conflict and
confusion, and improve the efficiency of regulations across
"We urge policymakers to capitalise on this opportunity
provided by TTIP to promote consistent high-quality regulatory
standards in global markets and economies that are closely
Ongoing efforts to harmonise market regulation between the
US and Europe have failed to establish common ground on some of
the most important parts of the G20 regulatory reform.
Despite the Path Forward agreement between the CFTC and the
EU intended to ease regulatory barriers to the transatlantic
derivatives market, liquidity in many markets fragmenting as
seek to avoid onerous Dodd-Frank requirements.
Elsewhere, the EU has accused US regulators of unfairly
targeting non-US banks in handing out fines and enforcing
In his speech on Friday Barnier argued that more developed
securities markets in the US enabled US banks to deleverage
faster than their European counterparts.
"There are reasons, due to structural features of the US
banking environment, why US banks have been able to reduce
their balance sheets more than EU banks.
"The US has more developed securitisation markets, for
corporate loans in particular. While in Europe covered bonds
feature in banks' balance sheets. US banks transfer many of
their mortgage loans to Fannie Mae and Freddie Mac, which are
not subject to leverage ratio requirements.
"In this way, significant leverage in the US financial
system is transferred away from banks’ balance
sheets. So there are structural differences, but they do not
mean that European banks are weaker or less capitalised than