Bank of France Head: Tough Regulations Make EU Lenders ‘Robust’

The head of France’s central bank says European lenders have benefited from tough love.

In a speech in Paris on Tuesday (May 9), Bank of France Governor Francois Villeroy de Galhau said Europe’s banks undergo stricter scrutiny from regulators than their American counterparts and have been more stable amid market upheavals.

“Our banks are robust, with substantial capital and liquidity buffers,” said Villeroy, whose comments were reported by Bloomberg News from its Future of Finance Forum.

“They are all subject to a) stringent Basel requirements and b) to single and strong supervision within the Banking Union since 2014, which on these two regards makes a big difference with many U.S. banks.”

PYMNTS looked at the future of banking regulation in the U.S. following three high-profile banking failures in a recent conversation with Gilles Gade, CEO of Cross River Bank.

He was asked who should carry the burden for responsible behavior and its enforcement, especially as lending partnerships become more common.

“Federal regulators need to work in partnership with responsible banks to create a clear regulatory path for these lending partnerships,” said Gade.

“Regulatory guidance has been proposed, though never adopted. In addition, lending partnerships are currently subject to a series of state-by-state true lender and other laws, rules and enforcement challenges.”

He added that this “patchwork” presents an “unreliable and unworkable path” for compliance and leaves openings for fraud and exploitation.

“A national standard will ensure that all banks, legacy and FinTech, can adopt a universal set of rules,” Gade told PYMNTS.

Gade went on to say that work by the Federal Reserve and Office of the Comptroller of the Currency to get a handle on new activity is good, but more training is needed at the federal and state level to determine which banks address risk appropriately.

“Unfortunately, in times of crisis, regulators and consumer groups tend to throw [out] the baby with the bath water,” he said.

In his speech, Villeroy said the durability of European banking is helping to attract investors relocating from London after Brexit, with Paris in particular benefiting as the only center to bring in all segments of the financial industry.

“The momentum has lastingly shifted from London to continental Europe,” Villeroy said. “Combine this with the strength of some key sectors of our economy; the result is that Paris now stands as the first stock market capitalization in Europe.”

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