Sept. 30 (Bloomberg) -- A top U.K. banking regulator backed public discussion about the merits of enacting financial transactions taxes, a day after the British Treasury opposed a European Union proposal for such a levy.
Adair Turner, chairman of the Financial Services Authority and a member of the Bank of England’s Financial Policy Committee, told an academic conference in the southern U.K. city of Winchester yesterday that he is “certainly sympathetic” to transaction taxes being explored.
The EU this week suggested such a tax take effect in 2014, annually raising about 57 billion euros ($77 billion). The proposal would apply a tax of 0.1 percent on trading of stocks and bonds, with a 0.01 percent rate for derivatives contracts, according to the European Commission, the EU executive.
European governments are split over the tax’s merits and British banks warn that an EU-only measure would drive business to other regions. The U.K., home to Europe’s biggest financial center, has opposed the move, which requires the unanimous support of all EU countries. The U.K. Treasury reiterated this week that such a levy would need to apply globally.
Turner, who said he was discussing a personal position, first raised the idea of a so-called Tobin tax in August 2009, when he told Prospect magazine it would help redistribute bank profits to the poor and “public goods” like fighting climate change.
“I thought financial transaction taxes should be taken out of the index of forbidden thought,” Turner said yesterday. He nevertheless added that it was hard to make the case that a transaction tax would have prevented the recent financial crisis.
“I think there are pros and cons,” he said.
Turner also said regulators may need to use unconventional policy tools to ensure banks don’t cause another credit boom and financial turmoil.
Supervisors “may need to be still more radical” in regulating banks’ trading of complex financial products, he said. He called for minimum ratios for measuring risk, known as risk weights, to be applied globally as part of the Basel Committee on Banking Supervision’s rules on bank reserves.
--With assistance from Simon Clark and Ben Moshinsky in London and Rebecca Christie in Brussels. Editors: James Tyson, Carlos Torres
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