The Global Investment Banks are Now All Becoming American: Does that Matter for Europeans?

Forthcoming, Journal of Financial Regulation, Volume 2, Issue 2, 2016

23 Pages Posted: 8 Jul 2016

See all articles by Charles Goodhart

Charles Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group

Dirk Schoenmaker

Rotterdam School of Management, Erasmus University; Erasmus Research Institute of Management (ERIM); Centre for Economic Policy Research (CEPR)

Date Written: July 7, 2016

Abstract

In the aftermath of the global financial crisis, the market share of US investment banks is rising, while that of their European counterparts is declining. We present evidence that US investment banks are on the verge of taking over pole position in European investment banking. While the US players have thus become dominant in Europe, China has taken matters into its own hands. Since 2015, Chinese investment banks have overtaken the position of American and European investment banks in the Asian-Pacific market.

Credit rating agencies and investment banks are the gatekeepers of the Capital Markets Union. The supervisory agencies in Europe can effectively supervise the European operations of these US managed players. We discuss the consequences of Brexit. On the political side, we suggest that the European Commission should keep on viewing its, albeit declining, banking industry as a strategic sector. The Commission, the European Central Bank and the Bank of England should jointly develop a strategic agenda for the EU-US Regulatory Dialogue.

Finally, corporates rely on investment banks to issue new securities. We recommend that the big European corporates should cherish the (few) remaining European investment banks, by giving them at least one place in a further US dominated banking syndicate. That could help to avoid complete dependence on US investment banks.

Keywords: investment banking, corporate finance, financial regulation and supervision

JEL Classification: G24; G28; G34

Suggested Citation

Goodhart, Charles A.E. and Schoenmaker, Dirk, The Global Investment Banks are Now All Becoming American: Does that Matter for Europeans? (July 7, 2016). Forthcoming, Journal of Financial Regulation, Volume 2, Issue 2, 2016, Available at SSRN: https://ssrn.com/abstract=2805208

Charles A.E. Goodhart

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

Houghton Street
London WC2A 2AE
United Kingdom
0207 955 7555 (Phone)
0207 242 1006 (Fax)

Dirk Schoenmaker (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/dirk-schoenmaker/

Erasmus Research Institute of Management (ERIM) ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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