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Berlin drafts financial crisis bank tax

AFP · 25 Aug 2010, 14:58

Published: 25 Aug 2010 14:58 GMT+02:00

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German banks would have to set aside part of their profits to feed a fund that would deal with the potential collapse of a financial institution deemed to be of strategic importance.

The proposed legislation is expected to be approved by lawmakers by the end of the year and would tax banks based on their size and level of risk taken by their managers.

Germany is the first country to move towards implementing such a bank tax, and was pushed to act after bailing out the property-lender Hypo Real Estate at a cost of more than €100 billion ($127 billion) in guarantees.

Berlin wants other countries to follow its lead so German banks are not put at a disadvantage to foreign competitors, but to date only France has expressed enthusiasm for a similar tax.

No precise figures have been floated regarding potential revenues, though the government has said they would have amounted to €1.3 billion in 2006, before the financial crisis struck.

Story continues below…

The bill would also allow authorities to step in faster and more forcibly if a systemically important bank shows sign of weakness.

The government could for example sell off bank assets before helping to restructure remaining operations with cash from the fund.

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Your comments about this article

16:34 August 25, 2010 by Bushdiver
I guess if any country knows about the benefits of taxes, the Germans do.
07:46 August 26, 2010 by Brendon
Re: "Germany is the first country to move towards implementing such a bank tax"

This is incorrect. The UK has proposed a bank levy to start 1 January 2010 (http://www.hm-treasury.gov.uk/consult_bank_levy.htm)

Additionally, Sweden and Hungry already have bank levies in place. Furthermore, France has indicated it plans to implment a bank levy, Austria is considering a 'special tax on banks' and the US also proposed a bank levy (which was subsequently did not make it into the Dodd­Frank Wall Street Reform and Consumer Protection Act).
08:10 August 30, 2010 by William Thirteen
hmmm...could we use the revenues from this tax to buy credit default swaps on the very same banks?
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