Canada won’t go it alone on alternative to bank tax

* Canada to push “contingent capital” for Basel reforms

* Sees some support following initial resistance

TORONTO, June 10 (BestGrowthStock) – Canada won’t adopt a plan
under which banks would issue convertible debt to help pay for
for future bailouts until international supervisors embrace the
concept as an alternative to a bank tax, Canada’s main banking
regulator said on Thursday.

Canada has pushed for the “embedded contingent capital”
banking reform as an alternative to reforms proposed by other
countries that would tax financial institutions.

Under the plan, banks would issue debt and preferred shares
that would convert to equity in the event of a looming bank
failure.

Canadian Finance Minister Jim Flaherty has taken the lead
in opposing a global bank tax, saying it would unfairly
penalize institutions that have not required government
assistance during the recent financial crisis.

Canada’s banks are considered to be among the world’s
soundest.

Canadian officials are hoping the contingent capital plan
will be adopted when the Basel committee finalizes a bank
reform package in November.

“We really have to explore the international avenue,
because we are a Basel compliant country,” Mark White,
assistant superintendent at Canada’s Superintendent of
Financial Institutions, said at a briefing in Toronto.

“Unless we choose to diverge from (Basel), which is an
unlikely course, the decisions that will get made at the Basel
committee will circumscribe our course.”

He said Canada initially encountered resistance to the
contingent capital idea but is now finding “isolated support.”

Critics of the concept say the convertible debt would prove
difficult to sell unless banks agreed to pay prohibitively high
interest rates.

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(Reporting by Cameron French; Editing by Frank McGurty)

Canada won’t go it alone on alternative to bank tax