EU banks tax 'would help manage future collapses'
A Europe-wide tax on banks will provide funds to ensure that future banking failures are not at taxpayers’ expense, the European Commission said today.
Internal Market Commissioner Michel Barnier was unveiling proposals for a compulsory levy on all banks to form the basis of a multibillion-euro fund which would be used to “manage” financial collapses.
The proceeds of such a tax would be collected and administered by national governments, but would not be used directly for bailing out or rescuing struggling banks.
Instead, said the Commission, the reserve would be used “only to ensure that a bank’s failure is managed in an orderly way and does not destabilise the financial system”.
Mr Barnier said his proposal is for the establishment of an ``EU network of bank resolution funds''.
The aim is to ``ensure that future bank failures are not at the cost of the taxpayer or destabilise the financial system''.
He went on: “It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the bank sector. They should not be in the front line – 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.
“That is why I believe that banks should be asked to contribute to a fund designed to manage bank failure, protect financial stability and limit contagion - but which is not a bailout fund.
“Europe must take a lead in developing common approaches and providing a model for co-operation which could be applied globally.”
Today's proposal, which will be presented for consideration next month to EU finance ministers and G20 leaders at their summit, is part of the commission's new post-downturn ``crisis management framework''.
First set out last October, the framework aims to include more flexibility for regulators to step in to prevent bank failures, and to take measures for “the orderly resolution of insolvent banks while minimising costs to taxpayers”.
The bank levy will not help the current crisis but, if given the nod next month in European capitals and beyond, the commission will produce detailed crisis management proposals in October.
