A Europe-wide tax on banks will provide funds to ensure that future banking failures are not at taxpayers' expense, the European Commission said today.
Internal Market Commissioner Michel Barnier was unveiling proposals for a compulsory levy on all banks to form the basis of a multibillion-pound fund which would be used to "manage" financial collapses.
The proceeds of such a tax would be collected and administered by national governments, but would not be used directly for bailing out or rescuing struggling banks.
Instead, said the Commission, the reserve would be used "only to ensure that a bank's failure is managed in an orderly way and does not destabilise the financial system".
Chancellor George Osborne has backed the idea of a levy - it was included as a national policy in the coalition agreement published last week.
But the new government wants the freedom to use the pot of money in any way it chooses.
Business Secretary Vince Cable said in Brussels yesterday that the Government had "an open mind" about the scope of the scheme and insisted the exact way the revenue from such an EU-wide levy should be used was "still up for grabs".
Mr Barnier said his proposal is for the establishment of an "EU network of bank resolution funds". The aim is to "ensure that future bank failures are not at the cost of the taxpayer or destabilise the financial system".
He went on: "It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the bank sector. They should not be in the front line - I believe in the 'polluter pays' principle.
"We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future.
"That is why I believe that banks should be asked to contribute to a fund designed to manage bank failure, protect financial stability and limit contagion - but which is not a bailout fund.
"Europe must take a lead in developing common approaches and providing a model for co-operation which could be applied globally."Reuse content