The European Commission (EC) has criticised the US's unilateral approach to derivatives market regulation.
Speaking at a policy discussion in Brussels today, Nadia Calvino, director general of the EC's internal market on services, called for the wide application of equivalence or substituted compliance by regulators in order to effectively regulate across borders.
She said that, if the G20 countries share the same objectives and adopt similar regulations then it does make sense for them to each pursue their own individual regulatory regime.
"If each jurisdiction takes a unilateral approach, applying its own rules, then we would have a Tower of Babel of rules! And we would have no means to ensure that these rules would be consistent," said Calvino.
US regulators received particularly harsh criticism, with Calvino complaining that some have stubbornly refused to apply substituted compliance and are instead applying local rules to entities abroad.
"'Equivalence' or 'substituted compliance' are not novel ideas: they are a longstanding principle of international law - the principle of comity - that has been recognised in legal systems around the world," she added.
The use of equivalence or substituted compliance has been criticised as potentially being too lax, with some countries failing to implement regulations as strictly as others. But Calvino says it need not be, as rigorous implementation and assessment should mean national governments and regulators will not be able to ignore their responsibilities.
She also warned that failing to agree on cross-border regulation could fragment the derivatives market and should be a critical concern for regulators and the industry.