EU proposes new banking fund network

27 May 2010

The European Union (EU) has unveiled proposals for a new system of banking regulation which it claims would prevent the taxpayer from paying the cost of future financial crises.

As part of the EU’s vision for increasing the resilience of the financial services industry, member states would need to set up banking funds into which institutions pay a levy.

The funds would then be used to manage the failure of a bank, but not to help rescue an ailing firm from collapse, the European Commission (EC) explained.

Michel Barnier, internal market and services commissioner, said: “It is not acceptable that taxpayers should continue to bear the heavy cost of rescuing the banking sector. They should not be in the front line. I believe in the 'polluter pays' principle. We need to build a system which ensures that the financial sector will pay the cost of banking crises in the future.

“That is why I believe that banks should be asked to contribute to a fund designed to manage bank failure, protect financial stability and limit contagion - but which is not a bailout fund.”

The EC is expected to present the proposals to ministers and heads of state at the forthcoming G20 meeting during June.

By Jim Ottewill

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development