The world’s largest banks are urging regulators to rethink a growing shift towards nationally driven financial reforms, warning that the replacement of global standards with domestic rules risks undermining stability despite short-term market optimism.
Recent and anticipated regulatory changes in the United States, United Kingdom and European Union, including lower capital requirements and lighter oversight, have helped fuel a rally in global bank shares over the past year. While executives have broadly welcomed these measures, they are increasingly concerned that divergent national approaches are creating a fragmented regulatory landscape that raises costs and complicates cross-border operations.
The Institute of International Finance is preparing to call for a global review of financial regulation and supervision, with international bodies such as the Basel Committee on Banking Supervision and the Financial Stability Board expected to play central roles. According to the IIF, fragmentation is no longer a marginal risk but a day-to-day reality for banks operating across multiple jurisdictions. The group represents about 400 banks, insurers and asset managers, and says there is strong alignment among its members on the need for coordinated modernisation.
A supporting document argues for a global audit of existing rules to assess whether the benefits to financial stability remain proportionate to their economic and operational costs. One focus is the growing complexity of banks’ capital structures, an issue already under examination in the European Union. The IIF suggests the review could include the role of Additional Tier 1 debt, a deeply subordinated instrument that has proved contentious in Europe, while avoiding any increase in overall capital requirements.
The proposal also calls for a reassessment of supervisory practices in some jurisdictions, citing concerns about supervisory overreach and overly broad oversight. Bank leaders argue that uncoordinated reforms reduce transparency and risk pushing activity into less visible parts of the financial system. Whether policymakers are willing to prioritise global consistency over domestic flexibility remains an open question.
