EU finance ministers work on tougher banking oversight, levy to pay for future bank collapses

EU finance ministers work on banking oversight

MADRID — European Union finance ministers were working Saturday on ways to ensure tougher banking supervision, and considering a bank levy to pay for banks that collapse in the future, hoping to prevent a repeat of the recent financial crisis which cost governments billions of euros.

French Finance Minister Christine Lagarde told reporters late Friday that she wanted all major financial groups to pay a fee “on the basis of the riskiest activities that they conduct.”

“The riskier the activity, the more tax there would be,” she said. “You could call it a tax on risk.”

Any levy on banks to pay into a fund to rescue lenders in future crises would be set up individually by the EU’s 27 nations as there is no widespread support for a bigger European fund.

Portugal’s central banker Vitor Manuel Ribeiro Constancio — who will soon take up a post as the European Central Bank’s vice-president — said any levy should be limited to paying for bank collapses and should not be used for other projects.

“If governments want to go ahead then this should be linked to deposit guarantee schemes and possibly only used for restructuring and resolution problems of the banking sector itself, not for other purposes,” he told reporters before the Saturday meeting.

Poverty campaigners Oxfam and others are calling for a global tax on banks’ financial transactions that they say could raise $400 billion a year to channel to poor countries.

Finance ministers or their deputies from Belgium, Ireland and Denmark were unable to travel to the two-day talks in Madrid after a volcanic ash cloud grounded most flights in northern Europe.

France’s Lagarde said she was unsure how she would return to Paris on Saturday after her flight was canceled.

“We might be stuck a while here,” she said.