The European Union could extend a planned levy beyond banks to other financial services firms, according to a report outlining the bloc’s message to G20 leaders who meet soon to tackle reform of the industry.
The statement is likely to worry insurers who risk being caught up in a levy originally designed to target the profits of banks that are blamed for triggering the worst economic crash in a generation.
“A levy should be applied to all banks, and possibly to other categories of financial institutions on the grounds that their failure would pose risks to financial stability and/or because they would profit from financial stability,” officials write in the report.
On Tuesday, EU finance ministers meet to mull how to charge banks for an emergency fund. They hope to present a common position at a meeting of G20 countries this month, bolstering Europe’s influence in a debate about charging banks for financial crises.
“The financial sector should contribute to the cost of crisis,” officials write of the levy, which would be used to wind down stricken financial groups.
“A levy should be designed … to ensure that financial institutions internalize at least part of the risks their activities pose to the wider economy.”
Although it is mainly banks which are linked to the financial crisis, triggered when bad debt fears froze lending, insurers such as AIG or to a lesser degree Swiss Re, were also affected.
Analysts have also cited Europe’s biggest insurer and capital markets heavyweight Allianz as a little-known beneficiary of government rescues, including that of Germany’s Hypo Real Estate.
As G20 countries prepare to meet in Canada, there is growing consensus on the need to call banks to account and demand they put aside funds to prevent or cover any future banking failures. Canada and Australia, however, whose banks rode out the financial crisis well, are skeptical about the idea of imposing levies on the industry.
(Editing by Noah Barkin) (Reporting by John O’Donnell)
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