The European Commission will warn tomorrow (7 September) that the haphazard way in which member states are introducing levies on their banking sectors risks destabilising the internal market, and making it difficult for governments to co-operate in the event of another financial crisis.
Michel Barnier, the European commissioner for internal market, will urge governments to commit themselves to following common principles in the design of their levies, including that money from them should flow into funds dedicated to helping banks in financial difficulties.
National governments, with the exception of the Czech Republic, agreed in June to introduce levies on their banking sectors. Governments believe that the levies should be imposed on their banks in return for the taxpayer support the financial sector received during the crisis.
Since then, the UK, Germany and Hungary have taken legal steps to introduce levies, while France is expected to follow suit this month. Sweden has had a levy in place since 2009.
A Commission working paper, to be circulated tomorrow at a meeting of the EU’s finance ministers, warns that plans adopted by governments are conflicting, presenting serious dangers.
These dangers include that the differing size of national levies could lead to distortions of competition, and that banks could be subject to “double or even multiple taxation” (a problem already identified in the case of the levies planned by the UK and Germany).
“The differences already identified between the bank levies that have been recently introduced at national level make it urgent for the EU to adopt a co-ordinated approach on the issue,” the paper says.
“Problems are likely to increase as more member states develop their own separate approaches,” it adds.
A particular concern for the Commission is that only two member states, Germany and Sweden, have come out in favour of paying proceeds from the levies into so-called resolution funds to assist banks in crisis. Other governments prefer to put the proceeds in their general budgets. The Commission, a strong advocate of resolution funds, warns in the working paper that it will be more difficult for national supervisors to co-operate to wind up large banks if only some member states have resolution funds.
The paper includes common principles that should be used when designing levies. These include that the levies should be raised against a banks’ liabilities, rather than assets or capital, and that their scope should be dictated by which banks each member state supervises. The Commission plans to flesh out the principles in a policy paper next month.
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