Opposing moves on banking regulations could launch the next global financial crisis

Forcing different standards on banks and other financial services across the globe could spark the next financial crisis, the vice chairman of a prominent US financial services firm said Friday.

While the US is easing rules on banks, Europe has for the last couple of years toughened them. On Thursday, the US Senate passed new rules to soften regulation introduced in the wake of the 2008 financial crisis. But in Europe, brokers were obliged at the start of the year to split their research from their trading operations, in a series of attempts to increase transparency in investment banking.

But these opposing moves on regulation are a “bad thing,” Larry Thompson, the vice chairman of DTCC (Depository Trust & Clearing Corporation), an American post-trade financial services company, told American network CNBC. The firm acts as a clearing house, which is an intermediary institution between buyers and sellers of financial securities.

“There should be standards that are cross-nations, there should be harmonisation of all of those rules,” he said.

When asked if the world would change in that direction, Thompson said “probably not.” Furthermore, when asked if the lack of coordination on banking rules could be the “seeds of the next crisis,” he said: “It could be.”

Traditionally, regulations are toughened following a financial crisis and then later eased back.