WASHINGTON (Reuters) - The International Monetary Fund has called for a new world system to dismantle troubled financial institutions and a levy on banks to pay for it.
The IMF’s statement, released on Sunday, comes ahead of meetings here this week among fund officials, the World Bank and leading nations’ finance officials. It urges better international regulatory cooperation and stronger supervision.
Two years after the peak of the worst global financial crisis in generations, the IMF is seeking to keep momentum going for substantive cross-border financial reforms.
“Although important steps have been taken like Basel III ... much more remains to be done,” said Jose Vinals, a senior executive at the fund. “We need to work together.”
The Basel III accord on bank capital standards was finalized weeks ago. Earlier this year, the United States approved sweeping bank and Wall Street reforms. European Union nations have been moving along on reforms of their own.
After massive taxpayer-financed bailouts in the last crisis, one of the toughest aspects of the two-year-old push for a regulatory overhaul has been finding a way to ensure that taxpayers don’t get stuck with the bill for the next crisis.
“It would be unrealistic to have an international fund” dedicated to paying for the dissolution of financial firms that run into trouble, Vinals told reporters at a briefing.
“National regimes is what we were envisioning,” he said, adding that a nation would not have to impose a bank levy to participate in some sort of global resolution regime.
He said that the IMF’s bank levy proposal was “still on the table.” The fund initially proposed it in April, drawing statements of opposition from the banking industry.
Former Prime Minister Gordon Brown broached the idea of a levy in late 2009. Support for it has varied since.
U.S. President Barack Obama has proposed a $90 billion (56.8 billion pound) tax on big banks to recoup taxpayer bailout expenditures.
The U.S. Congress in June dropped a bank levy from the final version of legislation to reshape bank regulation, but Democratic Representative Barney Frank wants to revive it.
Frank is chairman of a key congressional committee that oversees banks. Like other members of the U.S. House of Representatives, Frank faces a reelection test on November 2. He may or may not return to the committee chairmanship.
The EU aims to reach a deal on a bank tax by the end of the year, the bloc’s presidency said last week.
Didier Reynders, finance minister for Belgium, which holds the EU presidency, said the EU was working on measures to ensure that banks and not taxpayers pay for bailouts in future. The bloc’s executive European Commission is studying a levy.
“We will try to reach an agreement on that by the end of the year,” Reynders told a Eurofi symposium on EU regulation.
The IMF released a “staff position note” calling for more global coordination on oversight, stronger supervision, an international resolution regime for troubled firms and possibly “a levy whose receipts could either accumulate in a resolution fund or be paid into general revenue ...
“Such a levy ... can be imposed on all financial institutions, with the rate initially flat but refined over time to reflect institutions’ riskiness and contributions to systemic risk,” the note said.
Editing by Bernard Orr