There is more support for a US-style levy than for a tax on transactions. So says Bank of England governor Mervyn King, who has welcomed President Obama’s proposal to overhaul the banking sector, the ‘Volcker plan‘.
In a Commons hearing on the “too big to fail” debate, Mr King said: “The proposals made it very clear that radical reform is on the table. One way or another we have to reform the financial system,” he added, cautioning that “not one proposal will solve all problems”.
Major structural change was needed rather than a limit on a bank’s size, MPs were told. Paul Tucker, deputy governor, said that restricting the size of banks may be “one ingredient”, but would not be enough on its own. Mr King warned that proposals to limit banking activities, such as Mr Obama’s, should be part of a
wider structural change.
The central bank chiefs agreed with US proposals that wholesale creditors should also share the pain and that taxpayers must not be allowed to shoulder the cost.
But Mr King dismissed the idea of a “Tobin tax”, pitting himself against the government. The idea was floated by Prime Minister Gordon Brown, and is said to be gathering support. “Of all the components of radical reform, I think a Tobin tax is bottom of the list,” said Mr King. “It’s not thought to be the answer to the too big to fail problem – there’s much more support for the idea of a US-type levy.” (from PA)
More information on the Treasury Select Committee, ‘Banking crisis: regulation and Supervision’.
Previous responses on same topic given by Professor Kay and Professor Goodhart, Jan 19
