NON-BANK financial firms were left reeling yesterday as it emerged the International Monetary Fund (IMF) proposes to levy new taxes on all financial institutions, crippling insurers, hedge funds, private equity firms and asset managers as well as banks.
Analysts at Credit Suisse estimated that the taxes could cost the European banking industry as much as 20 per cent of their pre-tax profits, with experts still grappling with the possible financial implications for the rest of the financial sector.
“This is document is about as bad news for the sector as it could have been,” said Credit Suisse’s Daniel Davies. “The hostile regulatory environment continues to move on, and will continue to generate unpleasant surprises like this one.”
Non-bank financial institutions yesterday also gave the proposals short shrift, calling them “grossly unfair” and “highly damaging”.
Andrew Baker, chief executive of the Alternative Investment Management Association, said: “Given the widespread consensus that hedge funds were not major contributors to the credit crisis and pose little or no systemic risk to financial stability it would not be fair for them to be singled out.”
Kerrie Kelly, the director general of the Association of British Insurers, said the proposals are “inappropriate and not justified”.
And James Barham, chief executive of fund manager River and Mercantile, added: “Why should organisations like ours, a partnership which creates jobs, risked its own capital [not the tax payers] and does not pose a risk to the financial system, be punished?”
The IMF, which prepared its report at the behest of the G20 leaders at the Pittsburgh summit last year, stressed that its proposals should be considered along with proposed changes to regulation to “ensure policy coherence, enable market participants to plan accordingly and avoid…placing an excessive burden on the financial sector”.
It said international cooperation was important to promote a “level playing field” and help wind up cross-border institutions in the event of future crises.
Politicians of all three parties yesterday welcomed the IMF’s proposals, which chancellor Alistair Darling described as “important”. “The recognition that banks should make a contribution to the society in which they operate is right,” he said.