EU capital requirements on megabanks: The low road or the high road

This Policy Brief focuses on capital requirements on the very largest banks, or megabanks, in the context of the broader current EU policy agenda of banking reform. The authors find that, at end-2024, requirements on US megabanks were generally stricter than requirements on EU megabanks, in line with longstanding US practice. A year later under the second Trump administration, US requirements on megabanks were no longer obviously tougher than those in the European Union, but they were not actually undercutting them either. There is thus no reasonable case for the European Union to ease requirements on its own megabanks in response to the current deregulatory drive in the United States. Instead, EU policymakers should prioritize actions to address the current banking policy fragmentation along national lines, even within the euro area. That means completing the unfinished banking union and integrating decision making on macroprudential buffers at the European Central Bank, which will make the banking policy framework significantly simpler and more predictable.