EU Internal Market Commissioner Michel Barnier yesterday outlined plans for an EU-wide tax on banks to set up ‘resolution funds’ to manage future bank failures in a structured way. The proposal would see national funds set up, but as a “network of bank resolution funds” across the EU, reports the Independent and the funds would be overseen by “independent executive bodies” in member states, according to the Commission.

However, the proposals contain proposals to merge these national funds to create a pan-European fund from 2014. That could mean that a crisis in one member state would be paid for using funds raised in other countries. The Independent quotes one British official saying: “We would insist that this fund remain in national hands. There is no question of this going towards an EU-wide pot of cash.”

The Commission said it would come forward with a full legislative proposal by the start of 2011, however the paper reports that Barnier’s office stated that he “confirms that in the legislative proposals that will follow, there will not be a proposal for a pan-European fund.”

Chancellor George Osborne also said that while he supported the idea of a tax, he was opposed to the idea of ring-fencing the revenue solely for future financial failures, warning that it could create a “moral hazard”, by encouraging banks to view them as an insurance policy. He added that, “The purpose of the bank levy is to raise money for general expenditure purposes”. The FT reports that France has a similar approach to the idea of a levy.

The Telegraph notes that Mr Barnier believes the proposals could be pushed through under the single market pillar, which would mean a decision would be taken by qualified majority voting, with no country having a veto. British officials are reportedly seeking legal opinions, suggesting that it could come under taxation rules, and therefore should be decided by unanimity. The proposal will be discussed at the EU summit on 17 June, and will feed into global discussions on banking regulation at the G20 meeting in Canada later that month.

A comment piece in FAZ by Brussels correspondent Werner Mussler argues that Michel Barnier’s outline fails to address the following questions: “How big should the bank funds be and who should administer them. What would be the role of the EU in the whole scheme?”

Source: Open Europe


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