Bankers respond to IMF’s plan for two-tier levy
22 Apr 10
The British Bankers’ Association has reacted cautiously to the two-tier banking tax proposed by the International Monetary Fund
The BBA says that it remains concerned at any moves that might threaten the competitive position of UK banks in the global market.
The IMF has outlined plans for a twofold global tax on banks and other financial services firms, including hedge funds and insurers. One would be based on the size of the institution’s balance sheet and the other on a combination of profits and payroll, so that the levy would take account of bankers’ bonuses.
For HM Treasury, the levy would mean collecting an additional £5bn to £10bn a year from banks based in the UK.
BBA chief executive Angela Knight said: "UK banks have already made structural changes - as well as being required to hold more cash and capital - to limit future risk. The banks have also historically been major contributors to the Exchequer as well as providing direct and indirect employment for around a million people.”
She added: “All taxes have an impact and more tax has more impact. The recommendations need to be carefully examined but we remain concerned about moves which would place the UK industry at a competitive disadvantage internationally. We also need to see all the detail of what is proposed - and how any new levy and tax would apply - to determine the effect it would have”.
The Association for Financial Markets in Europe, whose members include Credit Suisse, RBS, Goldman Sachs, Deutsche Bank, Lloyds and Morgan Stanley, reacted more negatively, arguing that banks should rely on shareholders, not taxpayers, in the event of another crisis.
It said: “Putting further pressure on banks' balance sheets, at a time when they are already facing potentially very large increases in the amount of capital they must hold, would have a stifling effect that would hinder their ability to support economic recovery and growth.
"Such a tax would be punitive, not only attacking successful institutions, irrespective of how they operate, but also requiring well-run banks to pay for the failures of their peers. Punishment should not be the purpose of tax policy, nor should tax be used as a means of controlling risk.”
Meanwhile, the Financial Times reports that US President Barack Obama will travel to New York today to argue for a financial regulatory overhaul in a speech.
The FT says “Obama, who first called for Wall Street to be reined back in a speech he gave as a presidential candidate at the same venue two years ago, will frame the bill as a choice between common sense financial reforms and special interests working on behalf of the big banks”.