Over the past twenty years, or slightly less, American banks have grown much more than European ones. This was acknowledged by European Commissioner for Financial Services Maria Luis Albuquerque, who responded to a question in Brussels at a press conference about the gap that has developed between US and EU banks, which are often dwarfed by their overseas competitors: while in 2007, before Lehman Brothers collapsed, Deutsche Bank had a larger market capitalization than Morgan Stanley, today the US investment bank’s market value is about six times that of the German institution (not to mention JPMorgan).

This size disparity, she observes, “makes a big difference, because larger banks are more competitive, even in Europe: they have the same rules, the same reporting requirements, and are subject to the exact same regulatory framework, yet they perform better because scale matters. Some of these things are like fixed costs. So if you have a certain level of fixed costs and you are large, it does not make much difference. For example, you have a large compliance department, so having more or fewer requirements does not make much difference.”

Small is not always better: “if you are smaller,” Albuquerque continues, “the impact is much greater. Simplification is therefore very important for our banks. It will also help foreign banks operating in Europe, but it is certainly not the only explanation for the problem. It is only part of the problem, and we do not believe it is even the most significant part,” Albuquerque concludes.