Canada says G20 enthusiasm for bank tax is limited

Tue Apr 20, 2010 4:57pm EDT
 
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OTTAWA (Reuters) - Canada does not expect universal enthusiasm for the idea of a bank levy among G20 finance officials at a meeting in Washington this week, a senior finance official said on Tuesday.

Canada opposes a global bank levy, first proposed by Britain as a way of ensuring that banks and not taxpayers pay for bailouts. But the idea is gaining traction in the United States and Europe and a report by the International Monetary Fund recommended taxes be imposed on banks.

The official told reporters in a briefing that the Group of 20 leading developed and developing nations must first follow through on a commitment to toughen capital standards for banks, a plan that is at risk of getting crowded out by new ideas like a bank levy.

G20 finance ministers and central bank governors will meet on Friday to discuss financial regulatory reform. They will also work on a plan to avoid a return to global current account imbalances that contributed to the recent financial crisis.

The Canadian official on Tuesday said much work was still needed to fulfill the G20's commitment to improve bank capital rules by year-end.

The official also expressed concern about signs that global imbalances were returning after shrinking during the global economic crisis.

That adds urgency to the G20's so-called framework for global, sustainable and balanced growth. That framework opposes mutual assessments among G20 members of their policies to ensure, among other things, that China relies less on exports for growth and the United States cuts its deficit.

It is in China's own best interest to allow its yuan to strengthen, the official said, but that alone will not solve global imbalances.

Canada and China will hold a bilateral meeting on the sidelines of the Washington meeting.

Finance Minister Jim Flaherty will tell his G20 colleagues that Canada's priorities for the June G20 summit in Toronto are the framework for ensuring balanced growth, financial reforms, trade liberalization and reform of the International Monetary Fund and the World Bank.

(Reporting by Louise Egan; editing by Peter Galloway and Frank McGurty)