EU finance ministers meet on bank levy

A press conference of the Informal EU Finance Ministers' Meeting is held in Madrid, Spain, April 17, 2010.

MADRID, April 17 -- European Union (EU) finance ministers met on Saturday for their second-day informal talks, mulling over a plan to impose a levy on the financial sector to pay for future failure of banks.

On the eve of the meeting, powerful EU Commissioner for Internal market and Services Michel Barnier indicated the proposed bank levy would not be trivial.

"If a contribution (bank levy) is made it should not be symbolic because the crisis has not been symbolic," he said. "The taxpayers' contribution has certainly not been symbolic and neither have been the job losses."

It was estimated that a bank levy could generate as much as 50 billion euros (67.7 billion U.S. dollars) a year for EU governments,


Barnier gave a rough idea about how the financial sector would be held to share the burden. He said riskier investment banks should pay a higher tax than less-risky retail banks.

French Finance Minister Christine Lagarde echoed Barnier, saying the new levy on individual financial institution should decide "on the basis of the riskiest activities that they conduct."


"The riskier the activity, the more tax there would be," she said. "You could call it a tax on risk."

Portugal's central banker Vitor Manuel Ribeiro Constancio, the new European Central Bank's vice-president in waiting, said any levy should be used only to pay for future bailouts of failed banks.

In the financial crisis, EU governments spent billions of euros to save big banks, which aroused strong discontentment among taxpayers.

"If governments want to go ahead with this, it should be linked with deposit guarantee schemes and possibly used only for restructuring and resolution problems in the banking sector itself and not for any other purpose," Constancio said.

The bank levy would be discussed by finance ministers from G20 countries at a meeting in Washington at the end of April, which is in preparation for a G20 summit of world leaders in Canada's Toronto in June.



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