Has more government intervention made U.S. banks stronger than Europe’s?


Lael Brainard, right. (Keith Srakocic/AP)

The United States moved fast and first to repair and reform our financial system, and we believe that strategy is already beginning to demonstrate its effectiveness....By contrast, Europe opted to move more slowly on stress test disclosures and measures to build capital and improve funding. As a result, many euro area banks were less resilient in the face of shocks last year, putting pressure on funding and credit and raising financial stress in a negative spiral.....

Far from disadvantaging our firms, the early actions to strengthen bank balance sheets and improve funding put U.S. banks in a stronger position to withstand financial stress relative to many of their international peers, while supporting credit flows to U.S. households and businesses at a critical time for the recovery....

Some argue that by moving first, we have put the United States at a competitive disadvantage. To the contrary, by moving early, we have been able to lead from a position of strength in setting the international reform agenda and elevating the world’s standards to our own.

The financial industry, however, raises concerns that Dodd-Frank will put U.S. banks at a disadvantage in the global marketplace, as it has some major new regulations that don’t exist elsewhere. Already, European banks with U.S. subsidiaries are taking steps to sidestep the new regulations, as my colleague Zachary Goldfarb reports today.

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