Comparing EU and US responses to the financial crisis

Since 2003, the EU and the US have conducted a vibrant regulatory dialogue on financial regulation, but domestic priorities seem to have taken precedence in response to the financial crisis. This paper compares the institutional and regulatory changes occurring on both sides of the Atlantic. On the institutional side, it compares macro- and micro-prudential reforms. On the regulatory side, it compares four key areas: bank capital requirements, reform of the OTC derivative markets, and the regulation of credit ratings agencies and hedge funds. It concludes by highlighting certain implications for the regulatory dialogue.

Karel Lannoo, chief executive, Centre for European Policy Studies

The EU and the US are in the midst of a fundamental institutional and regulatory overhaul in response to the financial crisis. This process is primarily driven by domestic agendas, but G-20 commitments also come into play. The final outcome of the reforms is not yet known, but policy frameworks differ substantially on both sides. On the EU side, the initiative is primarily with the EU Commission and the member states in the EU Council, and here the contours are clear. On the US side, the initiative is with Congress, and changes every day. Senate proposals, for example, differ fundamentally from those of the White House. Hence, an analysis of the final shape of the US regulatory overhaul is part guesswork.