With markets underpricing risk, Europe must not ease bank regulation, ECB argues

FRANKFURT (Reuters) -Financial markets are underpricing geopolitical risks and nearly all euro zone banks are exposed to some extent, so weakening regulation now could jeopardize the sector’s viability in the longer run, ECB supervisory chief Claudia Buch said on Thursday.

U.S. officials are working on a raft of initiatives to ease the regulatory burden on U.S. banks, including softening capital rules, a pullback on supervisory bank exams and a friendlier stance on bank mergers.

Buch, however, pushed back on these ideas, arguing that capital requirements do not come at the expense of profitability and banks must be prepared for difficult-to-predict scenarios, especially as governments’ ability to respond via spending is limited.

“Broad-based resilience does not come at the expense of lo