ECB representative strongly opposed possible loosening in banking regulation

Donald Trump's return to power has reinforced hopes of major US banks for deregulation. At the same time, it has also spurred calls for loosening of banking regulation in Europe, as creditors in the region have often criticized the strict regulatory environment for undermining their ability to compete with their US counterparts.

However, the region's supervisors should remain cautious, said Patrick Montagner, a regulatory official at the European Central Bank (ECB) whose department oversees more than a hundred of the eurozone's biggest lenders, from Deutsche Bank to BNP Paribas and UniCredit. The official said the banking system can easily become a cause of instability for the entire financial sector.

Montagner claimed that weakening or abolishing regulations could undermine the resilience of the monetary system. That kind of risk is inconsistent with the ECB's approach, he emphasized.

To support his position, the official mentioned the massive cycle of deregulation that took place in the region until the mid-2000s. According to Montagner, it was this cycle that eventually caused a serious financial crisis.