Myners plans to host 'global debate' on new bank levy

City minister says proposal would require international agreement to be effective
Click to follow
The Independent Online

The city minister is to host a "global debate" on protecting taxpayers from being called on to bail out failing banks in the future.

Lord Myners will host representatives from the G7 group of nations, the World Bank and the IMF in London on 25 January for the talks, although the agenda is likely to cover only "broad principles" because of the need to secure an international deal.

During the meeting, an American-style insurance levy on financial institutions will be discussed in an attempt to build up funds to avoid costly bail outs in the event of a future banking crisis.

It follows President Barack Obama's plan for a levy on US banks in an attempt to recoup billions of dollars spent by the US taxpayer on rescuing the American banking system.

In a radio interview, Lord Myners had appeared to open the door to a similar levy in this country, but the Treasury said yesterday that this was not an option for Britain.

A spokesman said this was because in the British bank bailouts taxpayers had taken equity holdings in the recipients of state funds which could ultimately be sold at a profit.

"There are mechanisms for us to recover the money but the US scheme is different," the spokesman added. "We are open to a levy to cover future bailouts. It would, though, require international agreement."

The Conservatives have indicated that they are in favour of an insurance-style levy scheme but only as long as the G20 group of developed and emerging nations agreed to it.

Lord Myners argued that Britain had already gone further than any other country in tackling issues such as excessive bank bonuses, citing the controversial one-off 50 per cent tax on banks' bonus pools announced in the pre-Budget report. It will affect bonuses above the first £25,000.

The tax has drawn fire from the City of London Corporation and political figures such as London's Mayor, Boris Johnson, who has claimed that up to 9,000 bankers could leave London.

But, while polls suggest it has broad public support, the tax has apparently had little impact on this year's bonus payments, with most banks opting to spread its impact across their operations and continuing paying as normal.

On Friday, JP Morgan Chase sparked fury after its full-year results showed that America's second-largest bank planned to increase pay to its investment bankers by one fifth. The company's investment bank in London employs 5,000 people.

The controversy is expected to be further stoked when Goldman Sachs unveils its final results later this week alongside what could be a record bonus pool for its bankers.

Lord Myners argued that the tax was having an impact, but was unable to say how much money it would raise, or how big the overall bonus pool would be this year after some exceptionally strong profit performances.

The peer said: "We expect remuneration committees of these boards, who are the final arbiters, to look very carefully at what drove the profits and how much should be awarded for talent and how much should be retained to support lending for the future."

Critics have called for a "high-pay commission" to report on the issue and have argued that banks have only made bumper profits because of the billions pumped into the world's economy by taxpayers.