US Economy 2017: Is Another Financial Crisis On the Way? European Banks Warn Against Easing Banking Regulations

European banking officials Monday warned against easing U.S. banking regulations, saying it could lead to a new financial crisis, and denied the eurozone is engaged in currency manipulation as suggested by President Donald Trump’s trade adviser.

European Central Bank head Mario Draghi, Bundesbank board member Andreas Dombret and Roberto Gualtieri, chairman of the European Parliament’s economic monetary affairs committee, told Reuters at the European Parliament’s committee on economic affairs in Brussels U.S. President Donald Trump should rethink the direction he is taking.

Trump Friday ordered a review of banking rules and pledged to roll back some of the provisions of the Dodd-Frank Act, which was enacted to end the excesses that led to the 2008 financial meltdown.

Draghi said easing or weakening banking regulations could sow the seeds of the next financial crisis, noting a major cause of the 2008 downturn was lax regulation.

"The last thing we need at this point in time is the relaxation of regulation," Draghi said. "The idea of repeating the conditions that were in place before the crisis is something that is very worrisome."

He added: “Frankly I don’t see any reason to relax the present regulatory stance which has produced a stronger banking and financial services industry than before the crisis.”

Dombret, a member of the Basel committee drafting new global banking rules, also rejected easing regulations while Gualtieri warned any unilateral moves in the U.S. could have a major impact on Europe.

Rep. Patrick McHenry, R-N.C., vice chairman of the House Financial Services Committee, has tried to pressure U.S. Federal Reserve Chair Janet Yellen to pull back from such forums as the Basel committee, saying the rules formulated by such bodies “are killing American jobs.”

“We have to see what exactly the U.S. administration wants to do with respect to negotiations of the Basel treaty,” Draghi said. “The combination of easy money and financial deregulation was exactly the ground upon which the financial crisis developed.”

Draghi rejected charges by Trump trade adviser Peter Navarro that Germany has been able to take advantage of the United States because of a grossly undervalued euro. Draghi argued the euro is weak because of overall economic weakness, not manipulation. He said Germany is able to run a trade surplus with the United States because of productivity gains, Bloomberg reported.

"First and foremost: We are not currency manipulators," Draghi said. "Second, our monetary policies reflect the diverse state of the [economic] cycle of the eurozone and the United States."

Draghi said there are no plans to tighten policy in the near term despite a recent uptick in inflation, which hit 1.8 percent in January. He said the ECB is prepared to increase the size and/or duration of its asset purchase program because of a still slack labor market and productivity developments that are depressing wage growth, Investing.com reported.

“Our current monetary policy stance foresees that, if the inflation outlook becomes less favorable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council is prepared to increase the asset purchase program in terms of size and/or duration,” Draghi said.