Financial Regulatory Forum

ANALYSIS-Transaction taxes, liquidity and patience

By Mike Dolan

LONDON, Sept 8 (Reuters) – The case for a tax on global financial transactions may have been perversely boosted by the relative success of foreign exchange markets through the past three years of world banking turmoil.

As markets in credit, interbank and securities lending malfunctioned and stock markets lurched violently, currency markets, for the most part, appeared to have a “good crisis”.

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BoE’s King calls for radical reform of banks

By Tim Castle

LONDON, Jan 26 (Reuters) – Radical reform is needed to make the banking system safer, Britain’s top central banker said on Tuesday, adding U.S. President Barack Obama’s plan to curb some activities would not fully solve the “too big to fail” problem.

Bank of England Governor Mervyn King said there was no “silver bullet” to solve the banking sector’s problems, and tinkering with regulation alone, such as bumping up capital and liquidity requirements, would not be enough when “stuff happens”.

Radical reforms were also needed to change the liability structure of the banking system, so creditors can’t simply walk away unscathed when a bank fails, King said.

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.

BREAKINGVIEWS – Copying U.S. bank tax will be tempting, but hard

By Peter Thal Larsen

LONDON, Jan 15 (Reuters Breakingviews) – Tim Geithner has changed his tune. Just two months ago, the U.S. Treasury Secretary dismissed Gordon Brown’s call for a global financial tax as “not something we would be prepared to support”. But now the United States has unveiled its plan to tax bank liabilities, Geithner is keen for others to do the same. He may be disappointed.

Other governments are bound to be tempted. The U.S. levy, designed to raise at least $90 billion over ten years, provides valuable tax revenue. It allows President Obama to demonstrate that he is being tough on banks just as they prepare to pay out large bonuses. And by penalising big banks that rely on wholesale funding, it imposes an explicit charge on those institutions that are deemed too big to fail.

But the United States is one of a very small group of countries that could impose such a tax on its own. It has a large domestic banking industry, and is home to many of the world’s major financial institutions. Only China and, perhaps Japan, are in the same category.

EXCLUSIVE-High-frequency firms organizing lobby group

By Jonathan Spicer

NEW YORK, Dec 21 (Reuters) – About 25 high-frequency trading firms have discussed forming a lobbying group within the Futures Industry Association as they move to deal with growing scrutiny in Washington, the association told Reuters.

The firms have held a series of meetings in Chicago over the last two months, spurred by the prospect of a new transaction tax, commodity market position limits, and the possibility of a crackdown on high-frequency trading, the FIA said.

The group has a draft mission statement but no name, it said. It is unclear how many proprietary firms will ultimately join the group, which is expected to be formalized in January, according to the association.

EXCLUSIVE – IMF exploring insurance levy on banks

By Brian Love
PARIS, Nov 8 (Reuters) – The International Monetary Fund is exploring the idea of making banks pay insurance fees to fund any future rescues in the sector, IMF managing director Dominique Strauss-Kahn said on Sunday.

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UK gives impetus to global banks tax, U.S. doubtful

Britain's Prime Minister Gordon Brown addresses the G20 Finance Ministers meeting at a hotel in St. Andrews, Scotland November 7, 2009. A tax on financial transactions to fund future bank bailouts should be considered with urgency, British Prime Minister Gordon Brown told G20 policymakers on Saturday, a significant departure from London's line to date.      REUTERS/Andrew Winning (BRITAIN BUSINESS POLITICS)   By Huw Jones
ST ANDREWS, Scotland, Nov 7 (Reuters) – Britain urged world governments on Saturday to consider a levy on banks to fund future bailouts, departing from long-held opposition, though there was little sign of the consensus needed to make it fly.

British Prime Minister Gordon Brown raised the idea at a weekend meeting of Group of 20 financial leaders in Scotland — ending London’s resistance to such moves on behalf of its huge financial sector.The United States, key to the success of any global initiative, rejected a tax on day-to-day transactions, though it left the door open to other ways to protect taxpayers from losses. Canada was also lukewarm.

“A day-by-day financial transaction tax is not something we are prepared to support,” U.S. Treasury Secretary Timothy Geithner told reporters.

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