Large financial institutions may have to pay an insurance
levy to help low-income countries hit by financial crisis, the
International Monetary Fund revealed yesterday.
Dominique Strauss-Kahn, the IMFs managing director,
said that it was just fair that the financial
sector should pay to help mitigate the systemic risks for the
global economy that its reckless actions have created.
His statement will be seen as an endorsement of French and
German leaders, who persuaded the G20 summit last week in
Pittsburgh to include the idea of a financial sector levy in
Strauss-Kahn said: Considering that the financial
sector is creating lots of systemic risks for the global
economy, and that it is just fair that such a sector will pay
some part of its resources to help mitigating the risks they
are creating themselves.
Having some money coming from the financial sector to
create a kind of fund insurance or funding for low-income
countries is something we are going to
consider, Strauss-Kahn added.
John Lipsky, the IMFs first deputy managing director,
added that the Fund was looking at how a mandatory deposit
insurance scheme to fund bank bailouts could be extended to
cover a broader levy.
We think the question that has been asked by the G20
[...] is a very valid question and [we will] be
responding, he said.
However Strauss-Kahn played down the idea of a tax on
financial transactions tax to quell market speculation, on the
lines of the Tobin Tax proposed by the late Nobel Laureate
The very simplistic idea of just putting a tax on
transactions will not work, he said. For many
technical reasons I think [it is] very difficult to
Anti-poverty campaign groups hailed Mr Strauss-Kahns
comments as a breakthrough in their campaign for a global
transaction tax. He has said that it was fair to expect
the banks to pay for clearing up the mess they have
created, said Max Lawson, international policy adviser at
Oxfam A financial transaction tax is the only way to do
Last year Stamp Out Poverty, a UK-based group, produced a
report that claimed to show that a tax of 0.005% could be
imposed on all sterling transactions without causing any market
disruption or loss of revenue to the UK.
But Alistair Darling, Britains Chancellor of the
Exchequer, dismissed a currency tax as unworkable. A
global financial transaction tax could only operate if you had
an absolute global agreement. If any one country was out of it,
it wouldnt work, he told Emerging Markets.
He said the G20 statement was supporting the idea of
different countries making different sorts of contributions. He
cited the UKs 0.5% Stamp Duty on shares and a Swedish
levy on balance sheets as example of individual national
If you are going to do something internationally it
would have to be truly international and truly global, but when
countries signed up to that we were clearly that this was a
signal that different countries would do differently, he
At their summit in Pittsburgh, the G20 leaders asked the IMF
to look at options for making the financial sector pay a
fair and substantial contribution toward paying for any
burdens associated with government interventions to repair the
After that meeting, German Chancellor Angela Merkel said
that she saw that statement as opening the way to a new tax
while Nicolas Sarkozy, the French President, said that the IMF
study should look at a a tax on speculative or risky