IMF looks into possible bank insurance charge for bailouts
By Brian Love |
November 10, 2009, Tuesday
|
Print Edition
Print Edition
THE International Monetary Fund is exploring the idea of making banks pay insurance fees to fund any future rescues in the sector, IMF Managing Director Dominique Strauss-Kahn said on Sunday.
He said such a tax would be in line with a proposal over the weekend by British Prime Minister Gordon Brown, who urged world governments to consider imposing a levy on banks.
Strauss-Kahn, speaking by telephone to Reuters, said his organization was not pursuing a global tax on financial transactions - a so-called "Tobin tax" - which was one of several options floated by Brown.
But British media reports suggesting there is a split between the IMF and Britain on the fundamental idea of imposing a levy are wrong, Strauss-Kahn said.
"We're not working on a Tobin tax at the IMF" because such a tax would risk being unworkable, he said.
"We're working on a tax on the financial sector which, in line with what Gordon Brown said, would solicit an insurance premium from a business activity that is riskier than others."
The IMF will present concrete proposals for the tax next April to finance ministers of the Group of 20 leading economies for review before submission to G20 leaders in June.
Brown's statement at a G20 meeting in Scotland on Saturday marked a shift for Britain, which had previously backed away from supporting a global tax on banks given London's pre-eminence as a financial center.
Facing public criticism for spending tens of billions of pounds in bailing out British banks, Brown said it was time for banks to give something back to society.
"There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy," he said.
Soon after Brown spoke, US Treasury Secretary Timothy Geithner rejected the idea of an across-the-board tax on financial trading.
He said such a tax would be in line with a proposal over the weekend by British Prime Minister Gordon Brown, who urged world governments to consider imposing a levy on banks.
Strauss-Kahn, speaking by telephone to Reuters, said his organization was not pursuing a global tax on financial transactions - a so-called "Tobin tax" - which was one of several options floated by Brown.
But British media reports suggesting there is a split between the IMF and Britain on the fundamental idea of imposing a levy are wrong, Strauss-Kahn said.
"We're not working on a Tobin tax at the IMF" because such a tax would risk being unworkable, he said.
"We're working on a tax on the financial sector which, in line with what Gordon Brown said, would solicit an insurance premium from a business activity that is riskier than others."
The IMF will present concrete proposals for the tax next April to finance ministers of the Group of 20 leading economies for review before submission to G20 leaders in June.
Brown's statement at a G20 meeting in Scotland on Saturday marked a shift for Britain, which had previously backed away from supporting a global tax on banks given London's pre-eminence as a financial center.
Facing public criticism for spending tens of billions of pounds in bailing out British banks, Brown said it was time for banks to give something back to society.
"There have been proposals for an insurance fee to reflect systemic risk or a resolution fund or contingent capital arrangements or a global transaction levy," he said.
Soon after Brown spoke, US Treasury Secretary Timothy Geithner rejected the idea of an across-the-board tax on financial trading.
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