A top European Union (EU) official on Friday continued to push for the inclusion of financial regulation in a free trade agreement with the United States, saying it's vital to ensure global financial stability.
"The EU and the U.S. agree on the overall objectives of sound and resilient banks and financial markets. But we have and will keep different regulatory procedures and frameworks. We need to do more to make these regulatory systems work together," EU Commissioner for Internal Market and Services Michel Barnier said in a speech at the Peterson Institute for International Economics in Washington, D.C.
"It would be nothing short of a disaster if our agreements on broad principles are undermined by the detailed rules and their implementation being just too different. This is why we want to include regulatory cooperation on financial services in the TTIP," Barnier said about talks over the Transatlantic Trade and Investment Partnership, which aims to create the world's largest free trade area.
But there are concerns in Washington that to include financial regulation in the U.S.-EU trade talks would water down the Dodd-Frank Act, the biggest overhaul of financial regulation enacted by U.S. President Barack Obama in 2010, as the United States has stronger rules in financial services than the EU.
Barnier said he understood these concerns, but argued that the EU's objective was "better and high ability interoperable regulation."
"A race to the top, not a race to the bottom. Cooperating on regulation is the only way to ensure global financial stability while maintaining open markets," he added.
Barnier said the two largest economies should also enhance cooperation at multilateral level, such as the Group of 20 and the Financial Stability Board, and act together to address new challenges and new threats, particularly the growth of the shadow banking sector.
"We still have a lot to do to prevent systemic risk building up in the system and to give incentives to act within the regulated sector," he said.
The U.S. Securities Industry and Financial Markets Association and the Association for Financial Markets in Europe hailed Barnier's remarks, saying that financial services regulatory coordination should be included as a key component of TTIP.
"We urge policy makers to capitalize on this opportunity provided by TTIP to promote consistent high-quality regulatory standards in global markets and economies that are closely intertwined," they said in a joint statement.
The U.S. and EU leaders have initially set a timetable for completing an agreement for TTIP by late 2014. But negotiations moved very slowly amid rising political and public resistance to the deal on both sides.
The next round of TTIP negotiations will take place in Brussels in July.