EU financial head wants levy on lenders
By Aoife White |
May 27, 2010, Thursday
|
Print Edition
Print Edition
BANKS should pay a levy to help prevent future bailouts and shield taxpayers from the burden of multibillion euro rescues, the European Union's top financial chief proposed yesterday.
European governments are currently battling a debt crisis that has caused the euro to slide sharply against the United States dollar. The crisis was partly caused by the huge price states paid to rescue their financial systems over the past two years.
EU Financial Services Commissioner Michel Barnier yesterday said it is "not acceptable" that taxpayers should pay for costs that should be borne by banks.
He suggested that banks should pay a charge toward a fund in their country that would help pay for the costs of unwinding a bank on the edge of collapse. Such costs can include financing for bridging loans, transferring assets, creating a "bad bank" to take on problem assets and paying for lawyers, administrators and advisers.
Fees charged by law firms and others working on the messy unwinding of Wall Street investment bank Lehman Brothers have reportedly amounted to hundreds of millions of dollars.
The EU's proposed levy would not pay directly to bail out or rescue banks from bankruptcy. Rather, it would pay for the creation of a "resolution fund" and rules to handle bank insolvency may allow troubled banks to seek help at an earlier stage and avoid the need for state help to keep them afloat.
"We're not talking here about last-minute rescue or bankruptcy, we're talking about well before the disaster," said Barnier, calling for regulators to more closely watch banks and intervene - and even demand management change.
European governments are currently battling a debt crisis that has caused the euro to slide sharply against the United States dollar. The crisis was partly caused by the huge price states paid to rescue their financial systems over the past two years.
EU Financial Services Commissioner Michel Barnier yesterday said it is "not acceptable" that taxpayers should pay for costs that should be borne by banks.
He suggested that banks should pay a charge toward a fund in their country that would help pay for the costs of unwinding a bank on the edge of collapse. Such costs can include financing for bridging loans, transferring assets, creating a "bad bank" to take on problem assets and paying for lawyers, administrators and advisers.
Fees charged by law firms and others working on the messy unwinding of Wall Street investment bank Lehman Brothers have reportedly amounted to hundreds of millions of dollars.
The EU's proposed levy would not pay directly to bail out or rescue banks from bankruptcy. Rather, it would pay for the creation of a "resolution fund" and rules to handle bank insolvency may allow troubled banks to seek help at an earlier stage and avoid the need for state help to keep them afloat.
"We're not talking here about last-minute rescue or bankruptcy, we're talking about well before the disaster," said Barnier, calling for regulators to more closely watch banks and intervene - and even demand management change.
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