A harshly worded letter to Ben Bernanke, chairman of the Federal Reserve, from European Union Commissioner Michel Barnier became public this week, further fueling tensions among international financial regulators.

In the letter, Barnier, who represents France and oversees the commission's financial services initiatives, decries new capital standards the U.S. wants to impose on foreign banks doing business within its borders.

In December 2012, the Federal Reserve, acting upon mandates of the Dodd-Frank Act, proposed enhanced prudential standards for foreign banking organizations (FBOs) having total global consolidated assets of $50 billion or more and with U.S. subsidiaries holding $10 billion or more in total assets. On July 1, 2015, large FBOs would be required to establish an intermediate holding company (ICH) for all U.S. bank and nonbank subsidiaries. IHCs of foreign banking organizations would be subject to the same risk-based and leverage capital standards U.S. bank holding companies are held to. Foreign banks would also be required to conduct liquidity stress tests and to hold a 30-day buffer of highly liquid assets.

In his letter, Barnier attacks the proposal as an example of U.S. “protectionism” and “a radical departure from the existing U.S. policy on consolidated supervision of FBOs.”

The proposed rulemaking, he wrote, would have a negative impact on the implementation of international banking standards, such as those promoted by the Basel III accord, “jeopardizing or delaying the process.”

“The proposed rules implement a ‘one-size-fits-all' approach to consolidated supervision of FBOs, he wrote, adding that plan “depends exclusively on the amount of global and U.S. assets of the institution, completely disregarding whether the latter is subject or not to a consolidated supervision in its home country equivalent to that of the U.S.”

The IHC requirements, paired with heightened prudential standards, will be costly, Barnier wrote. Among the financial burdens cited: costs for establishing and maintaining the IHC; compliance with prudential requirements at IHC level and the additional reporting burden; and costs for the reduced flexibility in carrying out capital and liquidity management strategies at group-wide level.

“Such costs would only be justified only if the FBOs were not subject, on a consolidated basis, to home country standards comparable to those of the U.S. and if the U.S. financial stability were at stake,” he wrote. “In reality, despite the declared intention of putting FBOs on an equal competitive footing with U.S. bank holding companies, the new framework may, instead, result in a competitive disadvantage for FBOs when considering their operations on a global basis.”

Barnier lamented that the NPR “could spark a protectionist reaction from other jurisdictions” and “ultimately have a substantial negative impact on the global economic recovery.”

“Indeed, the potential retaliation effects of the new rules could end-up with a fragmentation of global banking markets and regulatory frameworks, with foreseeable consequences in terms of higher concentration of markets and lower levels of competition,” he wrote. “These developments would translate into higher costs for banks, particularly those which are internationally active, with negative repercussions on their ability to finance the real economy and economic growth.”