The world's biggest banks are urging the EU and US to back down on threats to clamp down on their industry which they insist will damage consumers and investors and hinder plans for an international approach through the G20.

In a letter to US treasury secretary Tim Geithner and EU markets commissioner Michel Barnier, the bankers warn of their concerns "that the US and EU are pursuing regulatory reforms in a manner that could conflict with G20 reform commitments, potentially resulting in a fragmented transatlantic capital market, to the detriment of consumers, investors and other market participants".

The banks, represented by the Association for Financial Markets in Europe and the Securities Industry and Financial Markets Association, are particularly concerned about the US plans for the Volcker rule, intended to stop banks engaging in risky trading activities, and Europe's planned curbs on hedge funds.

"The financial regulatory reforms currently being proposed and adopted by the US and EU will directly affect our firms' ability to provide the products and services our customers demand," the groups warned.

"Fragmented or conflicted regulation, even when the policy rationales are identical, will complicate the ability of market intermediaries, investors and those seeking to raise capital to conduct business efficiently," they added.

The organisations are raising their concerns at a time when the industry is warning that plans to make banks hold more capital could actually make them lend less money. Last week HSBC gave a clear warning that a new credit crunch could be sparked if new rules were introduced too quickly.

Bankers admit that regulatory change is needed but would rather it followed an international approach, particularly as the G20 leaders had published principles during the banking crisis which major countries pledged to follow.

President Barack Obama appeared to break ranks with the G20 when he outlined plans to impose restrictions on banks' activities – although it is far from clear that the legislation will be passed to allow his proposals to be implemented.

In their letter, the bankers made the point that the "health of our respective economies is inextricably connected, with trade and cross-border investment flows linking the transatlantic economies and capital markets".