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FRANKFURT, April 29 (Reuters) - The German bankingassociation, BdB, said on Monday that a push by U.S. regulatorsto tighten oversight of foreign banks would put European banksat a competitive disadvantage internationally.
In December, Federal Reserve Board Governor Daniel Tarullosaid foreign banks should be required to hold as much capital astheir U.S. counterparts, regardless of how their overseas parentcompanies are funded - a move that could trigger competitionamong regulators requiring banks to hold different levels ofcapital.
"If other countries followed the U.S. example, it wouldresult in a dangerous fragmentation of financial markets.Different rules and standards would make markets more unstableand inefficient," BdB managing director Michael Kemmer said in astatement.
"These new rules amount to a clear disadvantage when itcomes to competing with U.S. banks on a global level."
The United States has traditionally relied on foreignsupervisors to regulate overseas banks and specify appropriatelevels of capital, just as U.S. banks operating in the euro zoneare judged on their worldwide capital.
The Fed's measure could be particularly costly for DeutscheBank, Germany's flagship lender, and to a lesserdegree for Britain's Barclays Plc, because of theircorporate structure.
European Union Internal Market Commissioner Michel Barnier,the EU's top financial regulator, has said the U.S. plan couldlead to retaliation from other regulators.
As a governor on the Fed Board in Washington, Tarullo is apoint person for financial regulation, but also votes at everypolicy-setting meeting of the U.S. central bank.
