'Polluter pays' principle for banks

Published: 27 May 2010 y., Thursday

Biudžetas
The proposal represents the commission’s first concrete effort to forge a common approach to bank taxes, which have become more popular with EU governments since the financial crisis. The lack of EU-wide rules could also lead to competitive imbalances between national banking markets. It also threatens to hamper cross-border cooperation in the event of another crisis.

Under the plan, governments would use the revenues from bank taxes to set up funds that would operate under a common set of rules. The funds could be tapped to resolve bank failures in an orderly fashion.

The money would help cover costs like legal fees, temporary operations, and the purchase and management of bad assets. By providing a ready source of cash, these ‘bank resolution’ funds would help contain the crisis and prevent fire sales of assets.

A number of countries, including Germany and Sweden, have introduced or are considering introducing bank taxes. But there is no consensus on how much to tax or how to use the money. Some countries want to use the funds to ward off future bank crises or to recoup their losses from the current one. Others are eyeing bank taxes as a way to reduce their deficits.

Single market commissioner Michel Barnier said the funds would not be an insurance policy, used to prop up banks in distress. Rather, it is hoped they will help avoid taxpayer-sponsored bailouts by lessening the knock-on effects one bank’s demise on the rest of the industry.

“I believe in the ‘polluter pays’ principle. We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future,” Barnier said.

During the financial crisis, governments throughout Europe and around the world spent huge amounts of public money to rescue banks and shore up their economies.

For now the tax would be limited to banks. It would not, for example, apply to investment funds or insurance institutions. Bank contributions could be based on their liabilities, assets or profits – the exact method remains to be determined. The amount, too, is still an open question, with IMF suggesting between 2% and 4% of GDP.

The proposal complements the EU’s plan for managing future financial crises, which calls for more supervision, better corporate governance and tighter regulations.

The EU may present the idea to the Group of 20 as a way of dealing with doomed banks globally. EU leaders are expected to discuss the proposal in June ahead of the G20 summit in Toronto later that month.

 

Šaltinis: ec.europa.eu
Copying, publishing, announcing any information from the News.lt portal without written permission of News.lt editorial office is prohibited.

Facebook Comments

New comment


Captcha

Associated articles

The most popular articles

Gas Coordination Group discusses security of gas supply in the light of the current winter situation in Europe

In its first meeting in 2010, the Gas Coordination Group, under the chairmanship of the Commission, has focused today on the assessment of the situation on security of gas supply in the EU-27 and countries of the Energy Community and discussed priorities for the work of the Group in 2010. more »

Van den Brande welcomes Van Rompuy's commitment to multilevel approach to economic recovery

Luc Van den Brande, President of the EU Committee of the Regions (CoR), has used his first meeting with the President of the European Council, Herman Van Rompuy, to underline the importance of consultation between local, regional and national authorities. more »

Cameroon Firms Look to Hydro to Help Close the Power Gap

Basile Nkwesi, Directeur Commercial of Multiprint, speaks for dozens of frustrated business managers in this busy enterprise center when he talks about Cameroon’s costly and unreliable electricity. more »

In 2009 Bank SNORAS attracted 2400 new corporate clients

During 2009, over 2400 new corporate clients, whose total number currently exceeds 16 thousand, began using Bank SNORAS services. more »

Spain: in 2009 the EIB provided EUR 2.5 billion to finance SME and municipality projects

In 2009, the European Investment Bank (EIB) provided EUR 2.5 billion in 16 credit lines for financing the investment projects of SMEs (EUR 1 955 million) and local authorities (545 million) in Spain. more »

Euro coin counterfeiting in 2009

In 2009, the number of counterfeit euro coins removed from circulation was 172 100, down from 195 900 the year before. more »

Haiti Begins Participation in the IMF’s General Data Dissemination System

Haiti began participating in the International Monetary Fund’s General Data Dissemination System on December 28, 2009, marking a major step forward in the development of its statistical system. more »

In 2009 the price of Bank SNORAS shares grew by 163 per cent

According to the data of NASDAQ OMX Vilnius Stock Exchange, the price of Bank SNORAS registered ordinary shares grew by more than 2.5 times. more »

Commission clears proposed acquisition of Cadbury by Kraft Foods, subject to conditions

The European Commission has cleared under the EU Merger Regulation the proposed acquisition of Cadbury PLC of the UK by Kraft Foods Inc. of the US by way of public offer. more »

Changes in construction input prices in November 2009

Statistics Lithuania informs that construction input prices inNovember 2009, against October, dropped by 0.5 percent. more »