BRUSSELS (MNI) – The European Commission Wednesday set out plans
for European banks to pay taxes in to national funds which would be used
to prevent future financial sector crises, but stopped short of saying
how large the levies should be.

European Commissioner for Internal Markets, Michel Barnier, said
banks could be taxed on the size of their balance sheets, their
liabilities or their profits.

During the financial crisis taxpayers’ money was used to bailout
many European banks, and these proposals aim to avoid a repetition of
that by ensuring that the banks’ themselves pay for future mistakes.

Asked about the value of such levies, the Commissioner said, “I
can’t say anything about that today. I think it’s all going to depend on
the reaction of the banking sector.”

A recent International Monetary Fund paper suggested that such
funds should amount to between 2% and 4% of gross domestic product.

While most countries agree that banks should have to pay a levy and
that resolution funds are a good idea, there are differences of opinion
among the EU’s 27 members about the finer details of the plans.

Some countries want to be able to offset the amount raised in each
national fund against their national debts, while others, including
Germany, want the funds to be ring-fenced. The Commission backs a
ring-fencing of the funds.

Others fear the plans could infringe on their national sovereignty.

“We are not proposing any single federal fund,” Barnier told
reporters at a press conference. The plan “clearly says this is not a
European fund. It’s the creation of a national fund in each member
state,” he said. The idea is to have “coordinated management of national
funds,” he added.

“I fully respect those [national concerns] and that’s why I’m
proposing a national framework for national funds,” the Commissioner
said.

And he stressed that the fund was not for bailing out banks, but
for prevention of crises.

“We’re not talking here about last minute rescue or bankruptcy.
We’re talking about well before the disaster,” he said. “So the tool box
for example includes changing the management of an institution.”

“Its about intervening before it’s too late…without having this
kind of fund…what we will see is the uncontrolled falling apart of a
large institution,” Barnier said.

“We need to act quickly… markets work more quickly than we do in
politics,” Barnier said. “Nobody is safe from any new crisis.”

On the issue of short-selling, Barnier said he is working on
proposals and will make a presentation “very shortly.”

“These measure which other countries have already taken…will be
more effective if taken jointly,” he said when asked about a recent
German decision to ban some forms of short-selling.

The Commission’s bank levy plans will be discussed by EU leaders
next month and then at the G20 meeting in Toronto, Canada, June 26.

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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