Germany's coalition has agreed to place a levy on banks to raise billions of euros for future bailouts, boosting the chances of a global deal later this year. Berlin's move means it is no longer left pushing for a Tobin tax on financial transactions that is already dead in the water after the United States and Canada rejected it.
Britain has already back-pedalled on its support for a Tobin tax and is set to propose a levy on Wednesday, putting pressure on France to fall in line, making a G20 summit agreement on bank levies more likely in June. A senior ally of Chancellor Angela Merkel said the German levy would be tailored to hit mainly big banks whose failure would destabilise the broader financial system.
A levy is seen as helping to tackle the "too big to fail" problem of big banks assuming taxpayers will ride to the rescue as the alternative, as seen with the collapse of Lehman Brothers, is too destabilising to face again. "There will be a bank charge, we cannot talk about its reach yet, but it will be heftier for banks with a high systemic risk ... than for co-operative and savings banks," Volker Kauder, parliamentary floor leader for Merkel's conservatives, said on Monday.
"It will definitely reach into billions," Kauder said of the levy in an interview on ZDF television. A spokesman for the Finance Ministry said the cabinet was working on details and aimed to agree key points for a bank charge at a cabinet meeting on March 31. An internal Finance Ministry document obtained by Reuters on Friday showed the fund could reap as much as 9 billion euros ($12 billion) annually.
The country's biggest lender, Deutsche Bank, would have to pay a contribution of 2.2 billion euros, equivalent to a third of its expected pretax profit this year, Merck Finck analyst Konrad Becker calculated in a research note, assuming a charge of 0.15 percent of total assets.
No 2 lender Commerzbank would pay around 1.2 billion euros, Becker said. The levy, based on total assets less deposits, would need to run for years to raise the vast sums needed for bank bailouts. "That's a joke," Becker said of the 9 billion euro figure. A levy planned in Sweden on its much smaller banking sector aims to raise $10.6 billion for a future financial crisis fund.
The Stoxx 600 Europe index of banking shares fell 2.3 percent by 1330 GMT on Monday. Deutsche Bank fell 2.2 percent, while Commerzbank was 3.2 percent lower. Finance Minister Wolfgang Schaeuble said the charge could operate as a "kind of insurance". "It is about learning from the past crisis," Schaeuble told SWR radio on Monday, adding that it was important however that the charge would not affect banks' performance.
The financial crisis forced German taxpayers to rescue stock-market listed lenders IKB and Hypo Real Estate, which was nationalised, with billions of euros in capital and guarantees. Berlin also took a 25 percent stake in Commerzbank, bolstering its capital as part of an 18 billion euro rescue. The G20 has asked the International Monetary Fund to propose next month ways to recoup bank bailout costs. Its managing director, Dominique Strauss-Kahn, said last week a transaction tax was unworkable but that he would propose a tax of some sort.
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