European banks: the US is critical to global success

Author: John Crabb | Published: 25 Oct 2019
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Having a strong presence in the US is a crucial part of establishing a global bank, and it is imperative that banks approach the country with the correct combination of resources. This was the message from European bank executives at the FT's US Banking Forum yesterday in New York.

"For a global bank to succeed, it has to succeed in the US. That is the bottom line," said Scott Powell, CEO of Santander US. "You have to come with the resources you need to succeed, and we really feel great about the combination of resources we have and the foundation we have built in the US."

Powell continued that the bank's management team has been set up with knowhow to compete in the US, and that with its global parent's backing is able to leverage certain things like digital innovations and cyber infrastructure. "Globally, Santander has 140 million customers. That scale is going to provide us with some of the resources we need in the US to succeed long term," he added.

Joe McGrath, global head of banking at Barclays, also emphasised the importance of cracking the US market. In recent years the bank has recalibrated its global strategy around being a consumer, corporate and investment bank that is focused around London and New York.

"As part of that strategy, the US is critical to our success because of the depth of the market," he said. Barclays is in two primary businesses in the US; investment banking and consumer business. It is critical to succeed in a market with this much depth, he added, saying that he felt the bank had done a good job leveraging growth prospects in the credit card sector, as well as building on the strengths it already has.

"Both in the markets business and in the banking business, we have grown our share locally over three years and importantly, in this market, the US accounts for 50% of the overall fees. Over 60% of our banking business is here in the US," he said.

"Over 60% of our banking business is here in the US"

"We have gone through a lot since the financial crisis, but I am very confident that Barclays' global prospects, and in this region, will go forward."

A level playing field

Given the importance of the US banking sector for European banks, it is also crucial that the regulatory system in place is set up to allow foreign banks to have an actual impact and that new entrants, established or not, are not regulated out of contention. According to Powell, European banks compete on a level playing field to domestic banks as a result of a welcoming regulatory regime.

See also: Fed's regulatory alignment is logical but complicated

The US Federal Reserve recently finalised tailoring rules for domestic and foreign banks to more closely match their risk profiles.

The rules introduce a framework that sorts banks with $100 billion or more in total assets into four categories based on several factors, including asset size, cross-jurisdictional activity, reliance on short-term wholesale funding, nonbank assets, and off-balance sheet exposure.

"For Santander in the US, the category we were put in very much puts us on a level playing field with other American banks from a capital and liquidity perspective. We don't think the regulation in the US hinders our ability to deliver for our customers, and I applaud the Federal Reserve for taking steps to make the playing field level for foreign and domestic banks in the US," he said. "I don't think it gets in the way of anything, and Santander doesn't feel particularly disadvantaged by it."

See alsoFed supervision changes: winners and losers