American banking regulators criticized in the EU after SVB’s collapse

US regulators erred by failing to prevent the collapse of Silicon Valley Bank and other financial institutions, according to European Union lawmakers who believe this is also a moment for some self-evaluation in Europe.

Silvergate Capital, a cryptocurrency-focused bank, was the first to fall, saying on March 8 that it would cease operations. Shortly after, Silicon Valley Bank failed after a run on deposits. Signature Bank, which focused on lending to real estate firms, then saw deposit outflows that led regulators to seize the bank to prevent contagion in the sector.

Since then, First Republic Bank has also received support from other banks amid fears of a bigger shock to the financial system. And in Switzerland, a non-member of the EU, the authorities had to rescue Credit Suisse by asking UBS to step in with a takeover.

Meanwhile, regulators and officials across the EU have been nervous about potential contagion to their own banking sector. After all, it was not that long ago that European banks were in the depths of the global financial crisis.

“There is no more direct reading of American events [the] significant banks in the euro area,” Andrea Enria, head of the European Central Bank’s supervisory board, said on Tuesday. Like him, a number of officials have made efforts to emphasize that the European banking system is in much better shape compared to 2008.

This reinforces the view in the EU that the US should learn from some of the regulatory work that has been in place in the euro area since the financial crisis.

“You need stronger regulation … in the sense that the US lacks some controls,” Paul Tang, a lawmaker and member of the European Parliament’s economic committee, told CNBC.

Asked if US regulators made any mistakes, thus failing to prevent the recent banking crisis, he said: “I definitely think so, you have to have scrutiny. That was the message from 2008.”

At the heart of European policymaking, in Brussels, an official, who did not want to be named because of the politically sensitive nature of the subject, told CNBC that several meetings between EU officials in recent days “underscored the regulatory failures [in the U.S.] especially compared to the EU.”

One of the main differences is that the US has a more relaxed set of capital rules for smaller banks.

– The main difference is the Basel III requirements, says Stéphanie Yon-Courtin, a member of the European Parliament, to CNBC. “These banking rules,” she said, “apply to very few banks – that’s where the problem lies.”

Basel III is a set of reforms that strengthen the supervision and risk management of banks and has been developed since 2008.

It applies to most European banks, but US lenders with balance sheets below $250 billion do not have to follow them.

Despite some of the criticism of US regulators, the EU recognizes that this is not the time to be complacent. “We have to be vigilant,” Yon-Courtin said. “We need to be careful and ensure these rules are still fit for purpose,” she added, pushing for constant monitoring of the rulebook.

Indeed, one of the main discussions in the EU in recent days has been the need to improve the European Banking Union – a set of laws introduced in 2014 to make European banks more robust.

The debate has been politically sensitive, but the reality that high interest rates are here to stay has made it even more important.

“We are well aware that the ongoing rapid normalization of monetary policy conditions increases banks’ exposure to interest rate risk,” Enria, head of the ECB’s supervisory board, said on Tuesday.