EU to press for Europe-wide tax on banks

All European nations should introduce a similar upfront levy on banks, the EU internal market commissioner is expected to announce later.

Michel Barnier will suggest proceeds should go into a fund to insure against future financial failures.

UK Chancellor George Osborne backs such a levy but would prefer national governments to have more freedom to decide how the money is spent.

The move is among the global attempts to tighten up banking regulation.

A Senate bill in the US containing the biggest overhaul of banking regulation since the 1930s is awaiting approval by the House of Representatives.

An independent commission is being established in the UK to look at breaking up banks into their retail and investment banking arms to reduce risk.

Meanwhile, EU ministers recently voted to curb the activities of hedge funds and certain other investment funds.

Recklessness fear Mr Barnier will suggest the money raised by the levy should go into so-called national "resolution" funds, to pay to unwind banks that run into the kind of difficulties seen during the credit crisis of 2008.

"The commissioner will say that the resolution funds would be used only to provide the kind of temporary finance required to lubricate the break up of big banks" Robert Peston: European bank tax

 A common criticism of such schemes is that they could induce recklessness if the bank knows there is a permanent bail-out fund.

The BBC's business editor Robert Peston says Mr Barnier is expected to allay the chancellor's concerns in this area and point out that it would only provide temporary finance at the time of a collapse.

 The Conservative-Liberal Democrat coalition has said there may be a case for two new taxes on banks - one on what they borrow and another on their profits.

Sourced from the BBC