Financial Regulatory Forum

UK’s Brown sees growing support for bank levy

By Reuters Staff
January 25, 2010

By Keith Weir

LONDON, Jan 25 (Reuters) – British Prime Minister Gordon Brown said on Monday he saw growing support for some form of international levy on banks to fund support for the industry.

A global transactions tax, floated by Brown at a meeting of the Group of 20 nations in Scotland in November, was on the agenda when Treasury Minister Paul Myners hosted officials from G7 finance ministries, the IMF, World Bank and the Financial Stability Board in London on Monday.

“As a result of the advancement by U.S. President (Barack) Obama and the financial secretary Tim Geithner about their levy on wholesale lending, I think the proposals that I made at St Andrews for an international levy … are now gaining currency around the world,” Brown told a news conference.

“I think you will probably see further moves to get an international agreement about some international levy to deal with the responsibility that banks owe to society,” he said.

The U.S. administration has opposed a tax on financial transactions but earlier this month U.S. President Barack Obama called for a fee to be levied on major U.S. financial institutions to recoup “every single dime” of the billions of dollars spent rescuing the financial sector.

Among issues being discussed at the Myners meeting were a global insurance levy, the use of contingent capital instruments and a global transactions tax.

Banks around the world that enjoy any kind of state support should pay for the privilege rather than expecting taxpayers to bail them out, Myners said in an article published on Monday.

“If banks are to enjoy even a small hint of implicit underwriting from the state, they should pay for it,” Myners wrote in an article in the Guardian newspaper.

“We need to re-examine an economic model that seems to work much better for investment banks than for businesses and workers.”

Obama has also called for a limit on banks’ size and trading activities — proposals that have been welcomed by France, Britain and Germany although none said they would follow suit.

MONEY BACK

Britain spent tens of billions of pounds bailing out its banks and has been left holding large stakes in Royal Bank of Scotland <RBS.L> and Lloyds Banking Group <LLOY.L>.

“We will recoup the money that the banks have been given to help them through this crisis. And we will in fact make a profit on this at the end of the period,” Brown told a news conference.

Asked about reports that UK-based partners in investment bank Goldman Sachs were capping their pay and bonuses at 1 million pounds each, Brown said there was a danger of banks taking excessive risks and offering excessive rewards.

“I think there is a very big danger that the banks want to return to what I would call, the bad old ways,” he said. (Editing by Mike Peacock) ((keith.weir@thomsonreuters.com, 00 44 20 7542 8022; Reuters Messaging: keith.weir.reuters.com@reuters.net))

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