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EU FinMins tackle bank resolution, transactions tax

31 March 2012 18:51 (UTC +04:00)

Baku-APA. Proposals for dealing with failing banks, and for alternatives to an European Union financial transactions tax, dominated discussions in the closing session of an informal ECOFIN meeting held here on Saturday, APA reports quoting Xinhua.

"We had a very good discussion on bank resolution, that is how to handle failing banks, without having to pass the bill to the taxpayers," said Danish economy and interior minister Margrethe Vestager at a press conference after the meeting.

"A common European framework on bank resolution is a key, missing piece of the financial regulation reform after the crisis," she added.

Resolution schemes could include creating a reserve fund, administered at the country level or EU-level, and possibly funded by the banks themselves, to act as a security against failure.

Ministers also discussed the issue of "bail-in" or the extent to which private investors should suffer loss on their investments in case a bank or financial sector institution fails.

"We need to move forward on the European level to ensure there is a level playing field and better tools for handling cross-border banks," Vestager said, adding no concrete outcome is expected before June.

The controversial issue of a financial transactions tax (FTT) on trade in financial instruments in the EU was also tabled, despite widely differing opinions on the subject among EU countries.

France and Germany back the tax, while Britain strongly opposes it, regarding it as a threat to its financial services industry. The Danish government favors a global financial transaction tax, while Sweden does not want an EU-wide FTT.

"We think it would be a good thing if the EU Commission’s FTT proposal was taken off the agenda so we could try to find a compromise in a constructive manner. For us a red line would be that this cannot be an EU tax," Swedish finance minister Anders Borg told reporters at the meeting Friday.

Vestager said EU member countries are also exploring alternatives to the Commission proposal, including a Britain-style stamp duty and a "financial activities tax."

Ministers also discussed a proposal to make issuers regularly change the agencies rating their bonds. Vestager said there is some support for the proposal, but that ministers are sensitive to the practical constraints of such a move, as very few agencies have the necessary resources and skill to produce these ratings.

In related news, eurozone finance ministers meeting in Copenhagen agreed to boost the strength of the euro area’s bailout funds to 800 billion euros (1.1 trillion U.S. dollars), on Friday.

Denmark hosted the ECOFIN meeting as it currently holds the six-month-long rotating EU Presidency.

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EU FinMins tackle bank resolution, transactions tax

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