News | Sunday, 30 May 2010

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Malta ‘sceptical’ about EU call for bank tax

Government has declared itself “sceptical” about EU internal market commissioner Michel Barnier’s proposals to all EU member states to tax banks, in a bid to avoid a repeat of public bailouts to failed institutions.
Replying to MaltaToday, a finance ministry spokesman stressed that although Malta’s position is not to commit itself before the actual proposal is tabled, “Malta is sceptical on two counts; namely whether the right approach to bailout risks is an EU-level tax or levy on banks, and secondly every member state has different circumstances.”
The spokesman explained that Malta’s banking sector was “highly reputable and sound”, citing the World Economic Forum’s Competitiveness Index 2009-2010. “It has ranked Malta’s banking system as the 13th most sound in the world and finally unlike other countries no Maltese bank required government bailout during the financial crisis experienced during the past months.”
The ministry said it will insist that – contrary to the reality that certain banks were largely responsible for the financial crisis – the conservative and sound approach of Maltese banks was the reason the country survived the financial crisis relatively unscathed.
Maltese banks have also reacted to the Commissioner Barnier’s proposal.
Bank of Valletta believes it will be difficult for the EU to obtain approval for harmonised rules. “If such a proposal is not adopted by all EU member states it could lead to competitive distortions between national banking markets,” a spokesman for BOV said.
The creation of ‘national resolution funds’ would require banks to pay for measures for bailing out failing banks. The calculation and basis of the levy were not specified, but assets, liabilities, profits and bonuses were mentioned in the proposal document as potential bases.
“In any case, the levy should reflect the riskiness of the bank. The aim is for harmonisation of this bank levy in the EU, but Mr Barnier did not say that it will be exactly the same in each country as he said he was conscious of national sensitivities,” BOV said.
“The desired size for the funds is not yet known, but subject to further discussion. However, the EC document quotes the IMF indication that approximately 2-4% of GDP should suffice for the provisioning of resolution funds, depending on the relative importance of the financial sector.”
BOV stressed that the details offered so far are relatively scant, and so it would not be pertinent for the bank to take a view at this point in time.
The Portuguese bank Banif, now in Malta for the past two years, was cautious in its replies: “Banif Bank does not have any official comments to make at this initial stage. The bank has to await further details about the proposal before it can communicate its position.”
However, the spokesman said that “in the event that a levy is implemented, it is believed that some of that cost will affect the liquidity of all banks. However Banif will do its utmost to sustain its competitive and fair pricing strategy in order to protect both the interest of its clients and shareholders.”
Banif Bank said it will be monitoring the situation and will communicate its position in line with Banif Group’s policy later on.
HSBC Bank Malta said it was “premature” to comment at this point in time, given that so far this is a proposal from the EU Commission and not a decided policy.

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