BRUSSELS, May 26, 2010 (AFP) – Europe on Wednesday unveiled plans to levy a new insolvency tax on banks but insisted the proceeds will remain within national borders and will not be used to bail out failed banks. With the plans deliberately left open for discussion, however, some fear the goal eventually will be to create an EU-level fund.
Britain’s business secretary Vince Cable warned on Tuesday that should the plans be extended to create “a kind of insurance fund for future bailouts (that) … would cause some alarm in London.”
In the immediate aftermath of the 2008 global financial crisis, there were calls to reform the banking system, especially to tighten up regulation and prevent a repetition of the excessive risk-taking blamed for the debacle.
Since then, however, the drive for reform has slowed in the face of strong resistance by the major banks and financial markets, with some countries such as the United States and Britain seen as favouring less regulation. “The funds would not be used for bailing out or rescuing banks,” said a European Commission statement, “but only to ensure that a bank’s failure is managed in an orderly way and does not destabilise the financial system.”