Entire rivers of ink have been spilt by journalists attempting to sketch out the direction of the wind over the next four years in the wake of Donald Trump’s victory earlier this month.
Alongside tariffs, deregulation is one of the biggest buzzwords out there in the post-election ether. And while it’s impossible to say what shape either of those two policy planks will take in the course of the new administration, there is a sense that Europe will have to gird its loins for big changes ahead.
The consequences could be large for a European financial sector that already feels it is struggling to compete. Restive thanks to the clatter of new rules and regulations — not to mention sanctions regimes — that have come down from the EU in recent times, the mood among banks and other financial services companies is likely to worsen if the Trump administration moves to further unleash the dominant US financial services sector.
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It’s not surprising then to see EU regulators standing up for the regulatory consensus that has formed on this side of the pond since the 2008 crisis. In two separate speeches on Wednesday, Central Bank of Ireland officials made sure to remind their audiences of the perils of “light touch” or “pro-cyclical” regulation and its specific relationship to the crisis that engulfed the Irish financial sector and the wider economy here almost 20 years ago.
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Governor Gabriel Makhlouf told a Financial Services Ireland dinner that the European consensus around the need for strong financial sector rules “is at risk of slipping”.
He went so far as to venture that “driving growth through ‘lighter touch’ financial regulation failed”, leading directly to the 2008 crisis, the consequences of which the world — and the Irish economy — is still wading through in one form or another.
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Deputy governor Vasileios Madouros, meanwhile, warned the Federation of International Banks in Ireland’s annual conference of a “waning global appetite” for the implementation of new rules that have already been agreed upon, like the Basle III agreements.
Their remarks were hardly incendiary and were unlikely to change too many minds among the members of their respective audiences. Perhaps, however, they are indicative of what policymakers see in the tea leaves.
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