Financial Regulatory Forum

Regulatory forbearance looms as next big supervisory risk for financial giants

By Susannah Hammond

LONDON/NEW YORK, Sept. 9 (Thomson Reuters Accelus) – Regulatory forbearance is not a concept that has hit many headlines. It is, however, emerging as an underlying theme in publications by a range of bodies, from the International Monetary Fund (IMF) to the European Union and beyond. Regulatory forbearance is not about supervisory incompetence but, rather, the potential for a fully briefed regulator to decide not to intervene. There may be many legitimate occasions when non-intervention is the right call but, when judged with the benefit of hindsight, more supervisory interventions, made sooner, could have ameliorated some of the worst of the issues arising out of the financial crisis.

As Bank of England governor Sir Mervyn King stated, taking away the punchbowl when the party is in full swing is never an easy decision to make. Regulators, however, must be both capable and willing to take tough interventionist action. Regulators making such difficult decisions need to be assured that they have the backing of the international financial services community, the support of their domestic political masters and, perhaps to a lesser extent, the understanding of the public.

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COLUMN-Europe’s Speculator Full Employment Act: James Saft

(James Saft is a Reuters columnist. The opinions expressed are his own)

By Jim Saft

HUNTSVILLE, Ala., May 11 (Reuters) – Far from setting a trap for the “wolfpack,” Europe’s $1 trillion bailout package amounts to a full employment act for speculators, or should that be the reality-based community, for the foreseeable future.

Hoping to tame markets it accused of “wolfpack behavior,” the European Union on Monday unveiled a 750 billion euro package intended to avert a rolling sovereign debt crisis that has engulfed Greece and threatens to spread widely among the weaker euro zone countries.

The package can’t be blamed for being too simple: it contains loans from the International Monetary Fund, an EU emergency fund and euro zone governments, as well as an interesting undertaking by the European Central Bank to buy bonds in order to restore liquidity to supposedly poorly functioning parts of the bond market. In a move straight out of a Russian fairy tale, Spain and Italy, to name just two, are pledging money towards a package that may well be used to bail themselves out. Maybe they should have put up even more money.

from The Great Debate:

Taxing spoils of the financial sector

If you want less of something, tax it.

That truism is often used as an argument against a tax on profits, or health benefits, or employment, but in the case of the rents extracted from the economy by the financial services industry here's hoping it proves more of a promise than a threat.

The International Monetary Fund has put forward two new taxes on banks to pay the costs of future rescues, one of which is a fairly conventional "Financial Stability Contribution," with an initial flat levy on all banks, to be refined later into something with more precise institutional and systemic risk adjustments.

More interestingly, the IMF is also proposing a "Financial Activities Tax," (FAT) a tax on bank pay and profits which, if correctly designed, could serve as a tax on rents -- the unwarranted spoils -- of the financial sector.

SCENARIOS – G20 efforts to agree on a bank levy

By Huw Jones

LONDON, March 31 (Reuters) – France backed Germany’s plans for a bank levy on Wednesday to boost momentum for a global deal among the G20 group of leading countries later this year.

But national differences are emerging over details and some countries oppose the principle of a levy or tax.

NEXT STOP WASHINGTON

The IMF was asked last November to put forward proposals for making banks contribute towards bailouts and will present its recommendations to G20 finance ministers in Washington on April 24-25

G7 wants banks to pay for rescue

G7 on Ice

G7 on Ice

By Louise Egan and Gernot Heller

IQALUIT, Canada, Feb 6 (Reuters) – The idea of a global tax on banks to recapture bailout costs gained ground over the weekend, boosted by the Obama administration’s latest proposals, but there was no agreement on a specific design.

Finance ministers and central bankers from the Group of Seven rich nations called on Saturday for closer study of a UK proposal for a bank levy to cover the cost of the bailouts of 2008 and 2009 that ran to hundreds of billions of dollars.

The ministers, meeting in a remote town in Canada’s Far North, said any tax that result must be internationally coordinated and avoid choking off world economic recovery. Further details are unlikely to emerge for weeks.

UK’s Brown sees growing support for bank levy

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.

EU presses IMF over financial transaction tax

   By David Brunnstrom and Timothy Heritage
   BRUSSELS, Dec 11 (Reuters) – The European Union increased pressure on the International Monetary Fund on Friday to consider a global tax on financial transactions to limit the risk of another economic crisis.
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EU backs global financial transaction tax

By David Brunnstrom and Timothy Heritage

BRUSSELS, Dec 11 (Reuters) – The European Union urged the International Monetary Fund on Friday to pursue a global tax on financial transactions to limit the risk of another economic crisis, despite U.S. opposition.

EU leaders also underlined the need for “sound and effective” financial sector pay at a two-day summit but, with the notable exception of Germany, did not broadly support French and British proposals to tax bankers’ bonuses heavily.

Although the leaders of the 27-nation bloc largely revived existing ideas, they signalled a desire to address voters’ outrage over a return of the big bonus culture in the banking sector so soon after it was bailed out with tax payers’ money.

IMF chief: “simplistic” financial tax won’t work

Dominique Strauss-Kahn, managing director, International Monetary Fund (IMF), is introduced at the International Economic Forum of the Americas conference in Montreal, June 8, 2009.  REUTERS/Christinne Muschi (CANADA BUSINESS POLITICS)    ISTANBUL, Oct 2 (Reuters) – International Monetary Fund Managing Director Dominique Strauss-Kahn said on Friday a “simplistic” tax on financial transactions would not be a good idea, but the IMF will continue work on proposals for systemic risk funding from the financial sector. (more…)

G20 to task IMF to probe “Tobin tax” on financial transactions -G20 source

Economist James Tobin, who conceived the idea of a global tax on financial transactions that now bears his name. PITTSBURGH, Sept 25 (Reuters) – G20 leaders have tasked the International Monetary Fund to investigate ways the financial markets could pay for the effects of the economic crisis, such as a tax on all international financial transactions, a G20 source said on Friday.

“A so-called ‘Tobin tax’ on all international financial transactions will not be mentioned specifically in the final communiques, but it was discussed. The IMF will now investigate and report back to the next G20 meeting,” the source involved in the G20 summit in Pittsburgh said.

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