G20 Implementation of Global Bank Tax

Canada may have scored a win at the G20 with the decision to let countries decide for themselves about whether to implement a bank tax, but there’s plenty more to fight over, opposition critics say. The G20 finance ministers agreed in Korea over the weekend not to designate a global bank tax, the funds from which would have been used for future bank bailouts.

They are pushing for stricter regulations, something the Canadian government and opposition parties’ support, but won't have a proposal ready until the November summit. Liberal finance critic John McCallum says the devil will be in the details, predicting debates over how much capital banks will require holding. The higher the capital ratios forced on the banks, the more secure the system is, but the fewer banks will be able to lend money in the short run.

So there will be a big debate about how high those capital requirements should be and also on how long they should allow the banks to implement them. Canada opposes the bank tax and deployed cabinet ministers around the world to lobby against it. Prime Minister Stephen Harper also discussed it in his meetings last week with British Prime Minister David Cameron and French Prime Minister Francois Fillon, who both support the tax.

The Tories argued having a safety net would let the banks make risky investments, knowing there was money available to bail them out. NDP finance critic Thomas Mulcair says he wants to see the government discussing a financial transaction tax with the G20, an idea supported by international development groups who want the world's richest countries to impose a 0.05% tax on financial transactions to fund humanitarian aid.

“Those countries with serious fiscal challenges need to accelerate the pace of consolidation. We welcome the recent announcements by some countries to reduce their deficits in 2010 and strengthen their fiscal frameworks and institutions,” the G20 said in a communiqué issued after the talks.

Attempts to introduce the global bank levy to fund future bailouts were ditched after opposition from Japan, Canada and Brazil, whose banks needed no public aid during the crisis. But the group said the financial sector should make a “substantial” contribution toward the cost of any rescue.