The CBC offers a little more detail on precisely what Canada’s proposal is: … a plan built around a concept known as “embedded contingent capital” – essentially one where banks sell bonds to pad their reserves, but the bonds would automatically be converted to equity during bad times, thus avoiding the need for a taxpayer bailout. The system theoretically would encourage bondholders to keep a closer eye on management because they would be unwillingly converted into shareholders if anything goes wrong. “[Our proposal] makes debt convert to equity so debtholders and shareholders take the hit when financial institutions fail and not taxpayers,” Flaherty said. “We think we have a better idea.” Sounds reasonable at first blush. (Or they could simply deleverage). In any case, the IMF is going to hate it, since there’s no globalizing capital pool to control.
Related: European Central Bank chief: Bank of International Settlements to Rule the Global Economy | Harper calls for global economic governance, lauds G20 as ruling forum | US prepares to push for global capital rules | Flaherty wins delay in decision on global bank tax at interim G20 meeting | Bankers Prepare To Assault Americans With VAT, Transaction Taxes | Global bank tax urged by IMF | Flaherty stands firm against new bank tax | G20 sounds warning over lack of progress on global regulation | Banking reforms urgent, Harper says at G20 sherpas’ meeting | G20 ’sherpas’ meet with IMF, World Bank on Ottawa | Tories hand out $75 billion worth of ’spending restraint’ | Gordon Brown’s plan for global bank tax ‘a step closer’ | Global Bank Insurance Levy Wins Support over Transaction Tax at Davos | Harper urges G20 to follow economic accords | Bankers unite against Barack Obama and Gordon Brown in call for world regulation | IMF warns against retreat from stimulus spending | Banks find gaping loophole in Obama financial reforms | Obama talking tough with banks | EU urged to adopt bank supertax | Obama ponders bank transaction levy to recoup bailout shortfalls | No new stimulus, economy ’stabilized’: Harper | Explosive Leaked Emails Expose Treasury Secretary Geithner’s Deception in ‘Backdoor Bailout’ | Final Copenhagen Text Includes Global Transaction Tax | EU calls for tax on bank transactions | UK: Brown takes campaign for Tobin tax to Commonwealth | UK: Brown proposes global fund to kick-start Copenhagen climate change process | Flaherty, USA say no to global financial tax, yes to continued ’stimulus’ at G20 | Bernanke continues pressing for sweeping new powers for Fed | IMF chief wants global bank tax | G20 nations meet as protests flare on issue of international banking regulation | IMF approves $13bn gold sale to boost lending fund | China Set to Buy $50 Billion in IMF Notes | China calls anew for super-sovereign currency | No one talking about dumping dollar: China minister | China explores buying $50bn in IMF bonds | Chinese economists deem huge holding of US bonds “risky” as Geithner visits | A Bigger, Bolder Role Is Imagined For the IMF | UK PM reveals G20 plan to boost IMF by $1 trillion, hails new world order (again) | UN & IMF Back Agenda For Global Financial Dictatorship | IMF poised to print billions of dollars in ‘global quantitative easing’ | Gordon Brown seeks sweeping reforms to give IMF global ’surveillance role’ | IMF may need to “print money”, act as “world’s central bank” as crisis spreads | Globalists Exploit Financial Meltdown In Move Towards One World Currency | World needs new Bretton Woods, says Brown | IMF prescribes state regulation of ‘global financial order’ | Bilderberg Seeks Bank Centralization Agenda | Banks face “new world order,” consolidation: report
Bill Curry, Jeremy Torobin, The Globe and Mail
May 5, 2010
As Harper digs in his heels, EU Commission President makes case for ‘type of insurance’ for global banking system
|Prime Minister Stephen Harper, European Council President Herman Van Rompuy and EU Commission President Jose Manuel Barroso leave a news conference after their meeting at the EU Council in Brussels May 5, 2010. FRANCOIS LENOIR/REUTERS|
A Canada-E.U. summit in Brussels on Wednesday exposed what appears to be an unbridgeable gulf between the two sides over the international campaign for a new global tax on banks.
In a sneak preview of a debate that will come to a head at next month’s meeting of the Group of 20 in Toronto, European leaders argue a new tax would ensure money is set aside in the event of a future financial meltdown and would discourage risky banking.
The European Union wants the upcoming G20 meeting to produce an accord that would raise billions — possibly hundreds of billions — from banks through new worldwide levies.
Prime Minister Stephen Harper counters that it makes no sense for Canada and other G20 nations that did not have to bail out their financial institutions with taxpayer dollars to turn around and impose a punishing tax.
Just prior to his private meeting with Mr. Harper, EU Commission President JosÃƒÆ’Ã‚Â© Manuel Barroso provided a detailed briefing to Canadian reporters — at his invitation — during which he rebutted Canada’s arguments against a tax.
“It’s not a punishment. It’s a type of insurance,” Mr. Barroso said. “The reality is American and European taxpayers paid a lot to avoid a complete meltdown of the financial system … I understand there are some countries that did not face the same difficulties, but all our countries are in the same global system and we all suffered the impacts.”
In response to a request from the G20, the International Monetary Fund recently produced an internal report that recommended two new bank taxes. One, a “Financial Stability Contribution,” would be levied at varying rates to discourage risky practices. The resulting fund could be used in the event of a future crisis.
The second, a “Financial Activates Tax,” would tax profits, salaries and bonuses.
Mr. Harper is travelling through Europe this week — with stops in Belgium, the Netherlands, Croatia and Germany — partly to prepare for Canada’s G20 and G8 hosting duties.
At the end of private meetings Wednesday, which also included talk of Canada-E.U. free trade negotiations, climate change and nuclear issues, Mr. Harper remained unmoved on the bank tax.
“We believe there is no justification for levies on banks and financial institutions,” he said. “Canada’s position has plenty of support, but it will be an interesting discussion.”
Central bankers and finance ministers from the G20 pledged last month in Washington to finish overhauling international financial regulations on schedule, with an emphasis on achieving appropriate minimum standards for the amount and type of capital banks keep in reserve and the level of debt they take on.
While they failed to come to a conclusion on a global bank levy, Wednesday’s comments from Mr. Barroso make it clear that the issue won’t go away.
Bank of Canada Governor Mark Carney last month called the debate over a tax a “distraction” from the “core agenda” and the idea itself “foolish.” Mr. Carney, Finance Minister Jim Flaherty and Julie Dickson, head of the Office of the Superintendent of Financial Institutions, have all spoken out against the proposal, arguing the focus should be on ensuring the G20 nations agree on minimum common standards for banks’ capital and liquidity.
Should the Americans and Europeans press ahead with taxes on their banks while Canada holds firm in its opposition — an increasingly likely scenario — foreign banks operating in financial centres such as New York and London might look at picking up and moving to Toronto.
“If the U.S. and Europe go ahead, it’s going to provide additional policy ammunition, if you will, to foreign banks that must be looking at their situation and saying, ‘You know, Canada’s looking better and better all the time,’” Ian Lee, head of the MBA program at Carleton University’s Sprott School of business and a former banker, said in an interview. “They’ve got the lowest taxation rate in the [Group of Seven], their country is stable, the people aren’t rioting on television every night over austerity, and they haven’t put in a bank tax.’’
Mr. Flaherty might even win political support for letting more foreign banks into Canada by insisting that they would not be permitted to take over domestic institutions, and that they would be held to the same standards on capital and leverage that helped Canada’s financial sector avoid catastrophe when the crisis spread around the world in 2008, Prof. Lee said.
“If he said something to the effect of, ‘Look, we’re going to retain the much more rigorous regulatory framework in Canada; we’ll welcome foreign financial institutions to Canada so long as they agree to adhere to the more stringent Canadian standards,’ then I think he could put forward a compelling argument that we’re going to loosen up on the restrictions because, after all, the Canadian banks are so strong, so large, that they are not under threat.’’
Source | See also under Economics: Quebec public-private wind power project generates turbulence | Greek rescue fears hit global stock markets | Goldman Sachs concedes case for restraining the big banks | Shaw buying up CanWest TV assets from Goldman-Sachs | Greece swallows tough medicine in $150B bailout, more spending cuts announced | Greece erupts as men from IMF prepare to wield axe | European Central Bank chief: Bank of International Settlements to Rule the Global Economy | Greece’s near bankruptcy won’t scuttle Canada-EU trade talks: minister | New austerity measures essential, says Greek PM | Harper calls for global economic governance, lauds G20 as ruling forum | HST begins taxing Ontario on Saturday | Canada offers Michigan $550M loan for NASCO link bridge | Goldman execs squirm in face of angry U.S. Senators | Greek debt crisis: Europe feels shockwaves as bailout falters | Standard & Poor’s downgrade Greek credit rating to junk status | Canadian housing market downturn a possibility, says report | Goldman’s Fabrice Tourre: Emails reveal he thought borrowers ‘won’t last long’ | Police State Canada 2010 and the G20 Summit | Big stakes in Canada-Europe trade talks, but little attention | Protesters and police get ready to square off at G20 summit | US prepares to push for global capital rules | World Bank gets $3.5-billion boost, revamps voting structure to make China number 3 | Greek bailout not limited to ÃƒÂ¢Ã¢â‚¬Å¡Ã‚Â¬45bn, Flaherty warns | In revealed e-mails, Goldman chief says we ‘made more than we lost’ by betting against market | Flaherty wins delay in decision on global bank tax at interim G20 meeting | IMF to move quickly on Greek request for loan | Greek PM calls for EU bailout loans | Unconstitutional? Ontario government slips another new energy tax in under the radar | Bankers Prepare To Assault Americans With VAT, Transaction Taxes | International World Bank ‘Farm-aid’ plan gets a modest start | The Obama Banking Regulation: Big Banks Are Too Politically Connected to Fail | Obama scolds Wall Street for fighting reform, pushes new regulation package | Greek civil servants strike, challenge EU/IMF talks | German bank severs Goldman ties | Goldman Sachs Eats Its Young | Foreigners continue to buy Canada | Flaherty stands firm against new bank tax | Canada’s brewing debt storm | Goldman Sachs charged with $1bn fraud over toxic sub-prime securities | Flaherty’s credit-debit code tougher than expected | Electricity rates surge in Ontario | China sells petrol to Iran while talking at UN about sanctions | Is Japan hurtling toward a debt crisis? | Do you take cash? In UK bills being supplanted by debit, RFID credit as retail revolution grows | Leveraged ETFs Are Under SEC Scrutiny | Oil sands deal gives China crucial voting bloc in bitumen export issue | Soros warns Europe of disintegration | Tucker: Bilderberg To Meet in Spain, Prolong Global Financial Recession For Another Year | Goldman fights accusations of greed | Roadblocks cleared for Windsor continental supercorridor link | Ontario unveils $8B in renewable energy projects | Investors rush to sell Greek bonds | Canada ‘enthusiastic rebound’ best in G7, OECD says | Small army to protect Toronto during G20 summit | Ontario launches U.S. bond | Paul Volcker: VAT, Carbon taxes may be necessary | Canadian dollar finds a solid resting place at parity | GM dealers sue law firm for conflict — Cassels also had government contract during restructuring | Nova Scotia budget hikes HST rate | J.P. Morgan rolls into Calgary | Auto industry rebound limited: experts | Toronto braces for G20 logistics crunch | Thousands protest Quebec budget | Wall Street: Looting Main Street | Manipulation of Gold Market by Financial Giants Exposed at CFTC Hearing | Britain pushes for new climate talks; IMF and global taxes to figure into wealth redistribution scheme | Obama sets sights on Arctic oil and gas exploration | The prison spending boom | G20 sounds warning over lack of progress on global regulation | EU ‘Free Trade’ and CETA: Advancing the Transatlantic Agenda | CETA worse than ACTA — EU Trade Negotiators Demand Canada Completely Overhaul Its Intellectual Property Laws | IMF struggles to conceal glee at Greek deal | Greece secures joint IMF/Eurozone bailout program | Facing years of deficits, Ontario freezes wages | Impact of $47B stimulus minimal: Fraser Institute | Canada’s GDP growth to top G7 in 2010 | Obama urges Senate to hand total oversight of financial sector to Federal Reserve, eliminate ‘Reserve’ part | Banking reforms urgent, Harper says at G20 sherpas’ meeting | RCMP needs 5,500 rooms during G20 summit | Greek PM threatens to go to IMF if no EU bailout | More stimulus spending coming | G20 ’sherpas’ meet with IMF, World Bank on Ottawa | Loonie passes 99 cents US | UK: Carbon capture storage lauded, will ‘generate 100,000 jobs and Ãƒâ€šÃ‚Â£6.5bn a year’ | Subsidized solar power projects approved in Ontario | Chinese facing debt time bomb | Pacific North American Regional Integration and Control | JPMorgan, Citigroup Helped Doom Lehman, Report Says | Is China actually bankrupt? | General strike cripples Greece as protesters clash with police | China rejects Barack Obama’s call to change yuan policy | Ontario tax collectors get $45K severance, keep jobs in HST federalization deal | Federal budget watchdog disputes Flaherty’s forecasts | MEPs vote overwhelmingly for an EU Tobin Tax | Green energy bubbles threaten to pop at both Federal and Municipal levels | Failed Banks May Get State Pension-Fund Backing as FDIC Seeks Cash | IMF chief calls for quota-based global warming slush fund | McGuinty eyes selling shares in LCBO, Hydro One | Frustrated Icelanders vent rage by voting no in referendum | Icelanders to vote no on debt deal | Ontario in no rush to sell Crown assets, minister says | Athens erupts as Greek austerity plan passes | Hope keeps Flaherty’s balanced budget afloat | Britain grapples with debt of Greek proportions | Greece unveils radical austerity package | Downtown Toronto to become a fortress for G20 summit | Athen’s coffers to run dry in two weeks, more cracks appear in Eurozone | IMF chief proposes new reserve currency | Man who broke the Bank of England, George Soros, ‘at centre of hedge funds plot to cash in on fall of the euro’ | Goldman role in Greek crisis probed | Bernanke Pushes to Keep Regulation Power as Some Senators Waver | Iceland stares into Icesave abyss | Leaked UN Documents Reveal Plan For “Green World Order” By 2012 | Citibank Controversy Puts Dubious FDIC Guarantee Back In The Spotlight | 702 U.S. banks in danger: FDIC | EU executive recommends fast-track membership for Iceland | Greek workers stage general strike | Tories hand out $75 billion worth of ’spending restraint’ | How EU Countries Cooked Books Using Derivatives | Inuit group blasts Cannon over summit | Toronto braces for G20 disruption, Ottawa to pick up security tab | Precedent setting meeting called as Canada’s premiers attend Governors Association in Washington DC | Convention centre confirmed as location for Toronto G20 summit | U.S. initial jobless claims rise unexpectedly | Goldman Sachs Helped Greece Obscure Debt Through Currency Swaps | Obama hails stimulus plan, warns of layoffs | Canadian household debt hits record high | Collapse of the euro is ‘inevitable’: Bailing out the Greek economy futile, says French banking chief | Euro currency union shows strain | B.C., 3 US states sign accord for ‘Pacific North America’ hours before Olympic kickoff | G20 security could strangle downtown | Shaw Cable moves for acquisition of controlling share in Canwest Global | Gordon Brown’s plan for global bank tax ‘a step closer’ | Stimulating our way into debt crises | EU leaders reach secret Greek bailout deal | GM to add second Oshawa shift early | Indigenous groups left out of Arctic leaders’ summit | G20’s Metro Convention Centre location to bump baseball, pride activities | Greek workers ‘give their reply’ to proposed austerity plan with national strike | Will Greece set off ‘global debt bomb’? | G7 brings competing visions to the Arctic | The Federal Reserve as Giant Counterfeiter | The US budget: Barack Obama’s $3.8 trillion red ink blueprint | EU cautions Greece about its deficit | Global Bank Insurance Levy Wins Support over Transaction Tax at Davos | Consumer debt loads are the new concern | No solution in dispute over Iceland deposits | Bloomberg: Secret Banking Cabal Emerges From AIG Shadows | Davos 2010: George Soros warns gold is now the ‘ultimate bubble’, calls for IMF to handle climate fund | Harper urges G20 to follow economic accords | Davos: Global climate fund threatens aid to developing world, campaigner warns | Obama Likely to Rebrand Climate Bill as Jobs Bill | Bankers unite against Barack Obama and Gordon Brown in call for world regulation | Geithner Told To Quit After E Mails Reveal Involvement In AIG Cover-up | IMF warns against retreat from stimulus spending | Why Did the ‘Stimulus’ Fail to Help the US Economy? | One quarter of US grain crops fed to cars — not people, new figures show | Terence Corcoran: Ontario puts $10B in the wind | Banks find gaping loophole in Obama financial reforms | Ontario Premiere McGuinty heralds Samsung ‘green energy’ deal | Obama talking tough with banks | High dollar to slow recovery, central bank says | EU Embargoes Canada’s GMO-sabotaged Flax Industry | Could Greece drag down Europe | EU urged to adopt bank supertax | Record surge in UK inflation | Iceland sets date for Icesave vote | ‘Green jobs’ are key to U.S., Canadian recovery: US Ambassador | Flaherty to use February G7 in Iqaluit (or Ottawa?) to push for global changes to financial system | ‘Significant chance’ of second financial crisis, warns World Economic Forum | Iceland says IMF aid likely delayed | Wall Street’s leading bankers admit: we made mistakes | The next big scam: Fraud endemic to carbon market | Flaherty’s economic plan blasted as leading to taxation or cuts | Idle job market hurting recovery, Flaherty warns | No new stimulus, economy ’stabilized’: Harper | Obama ponders bank transaction levy to recoup bailout shortfalls |TSX trades above 12,000 before retreating | Explosive Leaked Emails Expose Treasury Secretary Geithner’s Deception in ‘Backdoor Bailout’ | America slides deeper into depression as Wall Street revels | Tipping point at CanWest | Sarkozy says world currency disorder unacceptable | UK: Interest rates and quantitative easing on hold | Iceland blocks central bank debt repayment deal | Bernanke defends Fed’s actions, forecasts interest hikes | For more see The Memory Hole — Economics