Following a recent visit by the French Finance Minister Christine Lagarde to Germany, the French Finance Ministry has announced that both France and Germany will actively strive to support the introduction of a 'systemic risk tax' within the framework of the European Union and the G20.
Welcoming the decision by the German government to introduce a legal mechanism for resolving future crises and for restructuring banks, including the introduction of a “stability fee” consisting of a systemic risk tax, the French Finance Ministry emphasized that these measures will not only serve to reduce risk and strengthen the stability of Germany’s financial system, but they will also provide, together with the International Monetary Fund's eagerly awaited report on the subject which is expected in April, a very useful contribution to the international debate on systemic risk reduction.
According to the French Finance Ministry, experience of the recent financial crisis has highlighted the need for an efficient legal framework for resolving banking crises. The French Finance Ministry emphasized that the key objectives of such a framework must be to allow early intervention by authorities in the case of a crisis, and to manage the restructuring of a bank of systemic importance, including a cross-border group.
In its statement, the ministry underlined the need for a harmonized European framework for managing cross-border banking crises along the lines of that proposed by the European Commission. The French Finance Ministry also confirmed its support for the strengthening of prudential supervision of the banking sector, notably through the swift creation of a European committee on systemic risk, and through the effective introduction – in all countries – of the principles and regulations outlined by the Financial Stability Council in terms of market operator salaries.
The statement comes as British Prime Minister Gordon Brown announced that large economies are nearing agreement on a global bank tax, confirming that Britain, France and Germany are united on the need for a common basis for the levy, and emphasizing that the relationship between banks and society has to change. Eager to press ahead with the idea of a bank levy, Brown is hoping for a solution to the issue at the G20 summit meeting in November.