fpmi publishes position paper on bank levy
07. May 2010, Munich Financial Centre Initiative
The enacting of a bank levy is being discussed in Germany. Munich Financial Center Initiative (known by its German abbreviation of “fpmi”) has taken the position that this enactment has to adhere to a range of stipulations. A failure to promulgate these would give rise to a credit crunch or to tilted playing fields for Germany’s banks. FPMI is also calling for the levy’s containing adjustments for risks and individual institutions. These points are contained in fpmi’s position paper, whose provisions include:
1. To ensure the maintenance of a single EU-wide market for financial services, this special levy on banks has to be undertaken by all of the Union’s member states. The enactment of this measure has to be coordinated with efforts being undertaken on the G-20 and other international levels. To be avoided at all costs is Germany’s going it alone.
2. The levy has to be configured to account for risks and individual conditions. These criteria for the imposing of financing requirements include the business model being employed by the bank in question, its spread of risks, and the perils it poses for national and international financial systems. A requisite is to ensure that derivatives entered into as hedges are excluded from the risk-related items.
3. Requisite is also ensuring that the expenditure of the moneys paid into the stability fund and the capital earnings yielded from that be for the purposes foreseen for them, such as the financing of future restructuring and settlement measures involving major banks or the stabilization of the financial system as a whole.
4. Needed to be established is the extent to which payments into deposit and institution security systems could be taken into account when setting the bank levy. Double encumbrances are to be precluded.
5. Also to be taken into account when setting the level of the bank levy are the effects of other measures fostering the stability of banks that have been enacted, or are planned, or could be forthcoming. This particularly pertains to the increasing of the core capital/equity ratio imposed by banking supervision authorities, and the possible negative effects such might have on bank’s abilities to sustain operations and the provision of loans. Requiring ongoing monitoring, the latter capability has to be maintained to the extent enabling banks to adequately meet their responsibility of providing financing to their business communities.
6. The levy on banks cannot be a one-shot measure. Rather, it has to form a component of a wide-ranging improvement of the code of international banking and financial market regulation.
1. To ensure the maintenance of a single EU-wide market for financial services, this special levy on banks has to be undertaken by all of the Union’s member states. The enactment of this measure has to be coordinated with efforts being undertaken on the G-20 and other international levels. To be avoided at all costs is Germany’s going it alone.
2. The levy has to be configured to account for risks and individual conditions. These criteria for the imposing of financing requirements include the business model being employed by the bank in question, its spread of risks, and the perils it poses for national and international financial systems. A requisite is to ensure that derivatives entered into as hedges are excluded from the risk-related items.
3. Requisite is also ensuring that the expenditure of the moneys paid into the stability fund and the capital earnings yielded from that be for the purposes foreseen for them, such as the financing of future restructuring and settlement measures involving major banks or the stabilization of the financial system as a whole.
4. Needed to be established is the extent to which payments into deposit and institution security systems could be taken into account when setting the bank levy. Double encumbrances are to be precluded.
5. Also to be taken into account when setting the level of the bank levy are the effects of other measures fostering the stability of banks that have been enacted, or are planned, or could be forthcoming. This particularly pertains to the increasing of the core capital/equity ratio imposed by banking supervision authorities, and the possible negative effects such might have on bank’s abilities to sustain operations and the provision of loans. Requiring ongoing monitoring, the latter capability has to be maintained to the extent enabling banks to adequately meet their responsibility of providing financing to their business communities.
6. The levy on banks cannot be a one-shot measure. Rather, it has to form a component of a wide-ranging improvement of the code of international banking and financial market regulation.