European banks are laboring with reorganizations that will take years and many millions to implement. Thousands are losing their jobs and still there's little light at the end of the tunnel. Not so in the U.S. Why is that so?

Credit Suisse, Deutsche Bank, Barclays and Standard Chartered – proud banking institutes currently under reconstruction. The sheer number of European giants in a similar situation of change suggests that the old continent's banking industry is in troubled waters.

Not so the cousins in the U.S.: the banks across the Atlantic Ocean successfully dealt with the lessons from the financial crisis and are back expanding their business. Then attempts to explain the difference

1 Unperturbed Leadership
The CEO's of the biggest U.S. banks all are experienced managers who seen a great many crises. They are Jamie Dimon, James Gorman, Lloyd Blankfein and John Stumpf. They know their business in good times and bad times.

2. Proactive Crisis Management
The U.S. banks recovered more quickly than their European cousins. One reason was TARP. The «Troubled Asset Relief Program» freed U.S. banks from bad loans at the hight of the crisis in exchange for accepting state aid.

But while Commerzbank of Germany and Royal Bank of Scotland still have the state as shareholders, U.S. banks bought themselves free quite a while ago. The crisis of the euro badly affected European banking.

 

3. Faster and More Stringent Regulator
U.S. institutes haven't profited from a more lenient regulator, far from it: President Barack Obama signed the Dodd-Frank-Act five years ago in spite of virulent opposition from the banking lobby.

The banks were forced to improve the capital reserves, introduce stable refinancing methods and better risk controls. They have to put themselves up for an annual stresstest.

The Fed increased the capital requirement for big banks in the third quarter of 2015. And still, only J.P. Morgan doesn't yet fulfill the demands which come into force in 2019.

 

4. New York, Center of the Financial World
New York used to be the center of finances. With the financial crisis, Wall Street slumped and London took the lead. But with political uncertainty surrounding the United Kingdom's position in Europe and regulatory demands undermined the City's No. 1 position. Now Wall Street has been able to recover and the banks enjoy the new-found interest in the world's most important financial center.

 

5. Investment Banking
Wall Street is investment banking. European banks are cutting back their investment banking unit because of regulatory demands. Their U.S. competitors meanwhile put a focus on it: Goldman Sachs, Morgan Stanley and J.P. Morgan are leaving European rivals far behind.

The American institutes are dominating investment banking in London, Frankfurt and Moscow and no European bank is able to withstand.

 

6. A Question of Salary
The European public intensely dislikes excessive salaries. No surprise, highly paid chiefs of banks earned millions while their companies crumbled in the crisis.

U.S. banking bosses still earn more than $10 million. The least than can be said is that the banks attract the top talents with these salaries, unlike their European rivals.

 

7. Size Matters
U.S. banks are bigger – in terms of balance sheet, number of employees and market value. Size has become particularly important with new laws and regulation and with the damaging concept of «one-size-fits-all» applied in Europe. The bigger banks are better equipped to deal with the wave of regulatory demands and costs.

 

8. Domestic Market
The U.S. institutes have the biggest domestic market. As the American economy emerged more quickly from the financial crisis the banks profited even more from this competitive advantage. Europe is still laboring with its crisis.

 

9. Flexible Labor Market
The hire-and-fire principles applied by U.S. companies are brutal for employees and beneficial for companies in the financial industry. They gain in flexibility and speed and thus adjust more quickly to changes in the market. Wall Street cut 400,000 jobs in 2009 to 2011.

Changes in the workforce in countries such as Germany, France and Italy, economic powerhouses in Europe, are much more difficult. The flexibility of companies active in these countries are less flexible in times of crises.

 

10. Fintech Is American
Should fintech help develop the banking industry, U.S. banks are where it is strongest: Silicon Valley. The tech hub has taken the lead over London, Berlin and perhaps Zurich.

Some of the fintech applications already are in use in the U.S., while in Europe the nerds still operate in a climate of euphoria. The competitive edge once more is in the hands of U.S. banks.