Globally, the trend in banking sector regulation continues to be toward laxer rules, according to Fitch Ratings.
In a report Tuesday, the rating agency said the trend toward financial deregulation continued in both the U.S. and European Union in the second quarter.
For instance, in Europe, policymakers adopted a package of measures that aim to revive activity in the securitization market, Fitch reported.
The first legislative initiative proposed under the EU’s Savings and Investment Union Strategy included measures to streamline the regulation of securitizations, to lower risk charges for banks’ securitization exposures, and to expand the eligibility of securitizations for inclusion in banks’ liquidity buffers.
At the same time, in the U.S., the “latest move to deregulate the banking sector” by policymakers includes proposing lower leverage requirements for the global systemically-important banks (G-SIBs).
These proposals would more closely align leverage standards in the U.S. with the standards imposed on European banks, Fitch said.
Additionally, U.S. legislation that sets out a regulatory framework for stablecoins — including reserve requirements, transparency rules, redemption rights and anti-money laundering requirements — passed Congress, the report noted.
This trend toward relaxing bank regulation, particularly in the U.S. and Europe, has previously prompted a response from Canadian regulators. For example, in February, the Office of the Superintendent of Financial Institutions (OSFI) halted the implementation of certain provisions of the Basel III capital rules amid concerns about the impact on Canadian banks’ competitiveness if regulators in other major markets aren’t fully adopting the globally-agreed upon capital rules.