Brussels, 22/04/2010 (Agence Europe) - The International Monetary Fund (IMF) will be reporting to G20 finance ministers on Friday on options for ensuring that the financial industry pays the cost of the financial and economic crisis. According to leaked reports, the IMF will suggest introducing two taxes on banking. The first would provide for the costs of bailing out a lending institution in the event of a crisis and would be formed of contributions provided in advance of any crisis by all banks, which would be kept in a bailout fund or as part of the state budget of the country in question. The second would be a tax on the profits and income of banks once they cross a certain profitability threshold.
EU Internal Market Commissioner Michel Barnier reacted to the leaks on Wednesday 21 April 2010 from the fringes of the European Parliament's plenary in Strasbourg. He said the IMF's ideas are based on the same analysis and operate according to the same logic as the guidelines he himself had submitted at the Madrid ECOFIN Council (see EUROPE 10121). He mentioned three big ideas put forward by the IMF - the need to introduce a crisis prevention and management system in addition to regulatory measures in order to reduce the likelihood, scale and cost of future crises; the system should include a series of instruments that can be used at all the stages of a crisis, like the introduction of agencies, “intrusive instruments” and bankruptcy systems; and the IMF backs the idea of financial contributions to the cost of financial stability being used to set up bailout funds. The commissioner said that if banks were not forced to contribute to the costs of resolving the crises that they encourage then this would mean that governments, and therefore taxpayers, would have to pay up and the money would only be recovered much later, if at all. Barnier says it is important to ensure that banks make financial contributions to the bailout costs ahead of any crisis, which would also help solve the moral hazard of banks becoming too-big-to-fail for governments to feel able not to step in and bail them out where necessary. He said that the European Commission would be taking an ambitious approach to crisis prevention and management at the G20 finance minister meeting in Washington on Friday.
In a press release issued last week, the European Bank Federation expressed firm opposition to the idea of introducing a bank tax because this would duplicate the work on the introduction of stricter capital requirements without increasing financial stability. (M.B./transl.fl)