European governments will attempt over the coming months to agree on how the financial sector should cover the cost of bank bail-outs.
Debate has been intensified following the recent announcement by US President Barack Obama of a “financial crisis responsibility fee” to be levied on banks' assets. The 0.15% levy is expected to raise $90 billion (€62.94bn) over ten years.
Anders Borg, Sweden's finance minister, this week lobbied governments to copy a ‘stability fee' that Sweden introduced last year to fund any future national bail-outs. The fee, which has similarities with the US scheme, is calculated against all bank liabilities (excluding equity capital and some junior debt securities), and is levied at 0.036%. It has so far raised €2.87 billion, equivalent to 1% of Sweden's gross domestic product.
Political pressure
Borg made his case at a meeting on Tuesday (19 January) of the EU's Economic and Financial Affairs Council (Ecofin), which brings together finance ministers from the 27 EU member states. He cited “strong political pressure in all European countries not to allow bankers to run away without paying the bill,” adding that other countries had expressed “a lot of interest” in the Swedish model.
Paul Myners, the UK's financial services minister, will host a seminar on Monday (25 January) at which the G7 group of countries (France, Germany, Italy, Russia, Canada, the US and the UK), the International Monetary Fund (IMF) and the World Bank will examine possibilities for raising money from the financial sector. The IMF is preparing an analysis of options, including insurance fees, resolution funds, contingent capital arrangements and a global financial transaction levy. Its report is expected in April.
Spanish Finance Minister Elena Salgado, the current Ecofin president, will raise the issue at an informal meeting of finance ministers in Madrid on 15-17 April. Before that, the EU's Economic and Financial Committee (EFC), which brings together high-level officials from national finance ministries, will discuss possible courses of action.
“We will take initiatives and make sure that there will be further technical discussions in the EFC on this issue, and then it will come back to the Ecofin,” Borg said.
Transaction tax
Borg wrote in a letter to finance ministers on Monday (18 January) that the Swedish fee had “obvious” advantages over a financial transaction tax (an idea supported by the UK, French and German governments as well as by Joaquín Almunia, the European commissioner for economic and monetary affairs). Borg claims that the fee “does not encourage migration to financial centres with lower or no turnover taxes” and would not “hurt liquidity”.
Ministers received Borg's proposal cautiously. Christine Lagarde, France's finance minister, described it as “interesting”, but said that France will not adopt a definitive position until after the IMF report is published. Didier Reynders, Belgium's finance minister, urged member states to study “various ways” of making banks contribute to repairing the public finances. Jörg Asmussen, number two in the German finance ministry, said that Germany would “look into” the Swedish proposal.
