WSJ Opinion/Commentary: Chairman J. Christopher Giancarlo

November 6, 2017

There’s been much worry about the impact of Brexit on British and European banking and capital markets. It may seem that U.S. markets are protected from that uncertainty, but they aren’t. If the European Union mishandles Britain’s exit, the consequences for U.S. businesses and consumers could be serious.

Brexit will put London’s financial markets outside the European regulatory umbrella. As a result, the European Commission has proposed authorizing regulation of financial entities outside the EU by the European Central Bank and the European Securities and Markets Authority, the EU’s markets watchdog. The proposal would reach far beyond London. It would subject key U.S. financial institutions to European law and regulation—even when they serve U.S. customers.

One proposal would empower ESMA to demand on-site inspections of U.S. businesses such as the Chicago Mercantile Exchange without informing its primary regulator, the U.S. Commodity Futures Trading Commission. Another proposal would enable the ECB to impose additional regulations on those same U.S. businesses—again without informing or consulting the CFTC.

Such overlapping and uncoordinated regulation by the EU would be disruptive, expensive and detrimental to the U.S. trading markets and economy. Imagine a football game with two quarterbacks on the field vying for control of the ball.

These proposals have the potential to affect the availability of food in American grocery stores, the cost of home heating, and mortgage interest rates. Farmers and ranchers could experience cost increases to manage the risks of their businesses from unpredictable weather to fluctuating prices in livestock feed. Without firm, exact and clear limits on their application to American businesses, these European proposals could dry up the capital necessary for growth and job creation.

The CFTC, of which I am chairman, is focused on ensuring that American financial markets thrive and are well-regulated. That cannot be done if the EU second-guesses American markets and how businesses operate—taking partial control of the American economy, or worse, letting the Europeans call the plays. The solution to sluggish growth and stagnant wages is vibrant global markets for investment, not uncoordinated and overlapping regulation.

If the U.S. accepts European regulation of American financial companies, it would set a dangerous precedent—potentially opening the door to all manner of other interference. The European Union favors a highly prescriptive and rules-based approach to financial market supervision in contrast to the U.S. principles-based approach.

Undoubtedly Brexit raises challenging issues for the EU’s regulation of its financial markets. Here in America we have seen how burdensome economic regulation has thwarted the revival of broad-based prosperity. The American people have rejected that approach and demanded that financial markets contribute to economic recovery. The last thing Americans want is to have overseas regulators impose European costs and regulatory burdens on the American economy.

Last Updated: November 6, 2017