The widening profitability gap between Wall Street and its European counterparts has kicked off a serious conversation in Brussels about whether the continent’s stricter banking rules are becoming a competitive liability.

The numbers tell a stark story. European banks are currently trading at a 43% discount to their US peers based on two-year forward price-to-earnings ratios.

The great transatlantic banking divide

On the American side, proposed deregulation could unlock up to $2.6 trillion in additional lending capacity. US regulators are also pushing for a reconsideration of Basel III capital rules, with feedback expected by June 2026.

Europe, meanwhile, is tightening the screws. The EU’s CRR3 and CRD6…