Banks around the world could face two new taxes to cover the cost of any future bailouts under proposals by the International Monetary Fund circulated to the Group of 20 countries on Tuesday, which recommend that banks and other financial institutions pay fees to cover the cost of such government bailouts.
The proposals were requested by the G20 countries with the largest economies and will be discussed at a meeting of finance ministers and central bank governors in Washington this week. They probably will generate controversy with some countries, notably Germany and France, in favour of strong measures to deal with future rescue packages, and others, such as Canada, whose system weathered the global financial meltdown, holding out against any tax on banks.
British finance minister Alistair Darling welcomed the IMF report, saying financial institutions have to pay something back to the society in which they operate. Bank lobby groups, however, said they were concerned that new taxes could damage competitiveness. "We want proposals agreed as soon as possible," said Darling, who is scheduled to attend the Washington meeting.
But any agreement this week remains unlikely, not least because it was unclear whether European delegations would make it to the IMF/World Bank meetings given flying restrictions caused by a volcanic ash cloud, though European airports had started to return to life on Tuesday.
First proposed by British prime minister Gordon Brown in November, support for a global levy has been gaining traction in Europe and the United States as politicians try to appease public anger and find a way to recoup the costs of trillion-dollar bailouts.
The US Senate is considering legislation that contains a $50 billion fund to wind down big financial companies whose failure could endanger the US economy.