Policymaker calls for tax on banks for being too big to fail
BANKS should have to pay taxes or fees until they are no longer too big to fail, a top policymaker said yesterday, despite complaints that new regulations on banks are already hitting lending and growth.
Michael Cohrs, an external member of the Bank of England’s Financial Policy Committee (FPC) wants to use this money both to reduce the implicit subsidy given to banks, as they gain from investors’ confidence that the state will protect them should anything go wrong, and to build an insurance fund to pay for bailouts.
“The regulatory bodies should consider penalties or taxes on the largest banks to create ‘insurance funds’ which will be used when resolving one of the exceptionally large financial companies and to create an economic incentive for the firms to down-size,” he said.
Cohrs also warned regulators may not be able to stop banks collapsing, but must just have to learn to “try and deal with the fall-out” when it does happen.