andreas dombret : where do we go from here? the future of us - eu financial relations following the finalisation of basel iii speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the institute of international bankers, annual washington conference, washington dc, 5 march 2018. * * * 1 introduction ladies and gentlemen thank you for the kind introduction. it is a pleasure to be in washington and at the iib ’ s annual conference. let me use this opportunity to give you my perspective on the future of us - eu financial relations at this well - suited moment, given that the most important post - crisis global reforms have now been finalised. when i was going to prepare this speech, i asked myself : “ what do all of us in this room have in common? ” do bankers and supervisors across the atlantic share the same convictions? do we have the same ideas on financial policy? honestly, i am not perfectly sure on this. so i assume there is at least one major area of common ground, and that is the uncertainty we feel with respect to how things will proceed. take global banking regulation – and basel iii, in particular. on the one hand, we have just finalised basel iii, the global minimum standard for international banks. on the other hand, parliaments and governments in the united states and the european union are debating regulatory changes that seem to diverge from this global compromise. banks remain uncertain about precisely what the regulatory future holds. moreover, this uncertainty does not stop at finance. the us administration ’ s economic policy announcements, as well as brexit and other elections, are causing many to call into question the extent to which nations will actually coordinate their future economic policies. this tension between the global and national level creates political uncertainty. for example, many enterprises feel insecure about the economic policies under which they will have to do business in the future. likewise, bankers are asking how much of basel iii will be implemented in their jurisdictions and wondering about the individual paths that some countries will take. this tension between global harmonisation and cooperation, on the one hand, and countries ’ demands for individual approaches, on the other, will be one of the main fault lines – if not the crucial one – in future us - eu financial relations. let me elaborate on this challenge. 2 what we should – and should not – expect from international harmonisation recent years have made us confident – perhaps a little overconfident

is free to apply it in its jurisdiction. the second qualification of the basel iii standard is that it is for internationally active banks. as a result, jurisdictions are free to apply a different set of rules to smaller, only nationally active banks that pose no threat to international financial stability. the majority of countries already have less restrictive rules in place for smaller banks in order to reduce the operational burden imposed on them. i am a strong proponent of extending this proportionality further, because the highly complex regulatory reforms introduced in the wake of the financial crisis were intended for global banks and overburden smaller, regional banks. in sum, then, we ought to focus on truly global aspects, like regulating globally active banks, while leaving it to individual countries to carry out those tasks that they are better placed to take care of, such as regulating locally active banks. 4 the challenge of supervisory cooperation the second area in which we will see a re - balancing of global cooperation is supervisory cooperation. here, like with regulation, we should reassess where a global approach is sensible, and in which cases national approaches are better suited. as a result, we are likely to see more divergence in some areas, but hopefully some more cooperation in other areas. an example for more divergence is likely to be higher demands for licensing foreign bank branches and subsidiaries. take, for example, the discussion about introducing an eu intermediate holding company, or ihc for short, equivalent regime. the european union has been debating a draft law proposing the establishment of what are referred to as intermediate parent undertakings, or ipus for short : similar to the us ihcs, foreign banks would have to bring their eu operations under a single holding company. this will most likely become law ; and for good reason, because we need to have a better, consolidated understanding of what is going on in international banks doing business in europe. what ’ s more, we need to be able to act reliably in times of turmoil. otherwise, we would not be able to fulfil our mandate of ensuring financial stability. but to be clear, this instrument is by no means intended to make market entry more difficult for foreign banks – and the bundesbank will continue to advocate fair access for foreign banks. as a result, we will move further away from the idea of serving the world from one spot with the need for only one licence. this is frustrating in a way, but it ’ s a realistic approach. this must, however,