Investment banks to bear brunt of levy: EU’s Barnier

By John O’Donnell and Julien Toyer

BRUSSELS (BestGrowthStock) – The European Union’s financial services chief signaled on Thursday that investment banks rather than less-risky retail lenders should bear the brunt of any bank levy and such a tax should not be just symbolic.

Michel Barnier also pledged to force more transparency on speculators such as those blamed for aggravating Greece’s borrowing problems and applauded a safety net recently put in place by euro zone countries to reassure financial markets.

Barnier’s comments give the first indications as to the form a European levy on banks may take. As internal markets commissioner in the EU executive, he plays a big role in determining how the bloc’s 27 countries can impose such a tax.

Asked whether investment banks should pay a higher levy to reflect their risk-taking compared to retail lenders, Barnier told Reuters in an interview said: “The logical response would be yes.”

“If a contribution (bank levy) is made, it should not be symbolic because the crisis has not been symbolic,” the 59-year-old former French foreign minister said. “The taxpayers’ contribution has certainly not been symbolic and neither have been the job losses.”

Barnier said a task force headed by European Economic and Monetary Affairs Commissioner Olli Rehn was examining the role of speculators in the derivatives market.

Such market bettors were blamed for exacerbating Greece’s borrowing difficulties by snapping up insurance on the country’s risk of default.

“We know well that there are risks in this immense and opaque market for derivatives,” said Barnier. “We want to shine a light — that’s the aim of a package (of law) that we will present in June.”

“My response as a politician is to say ‘Stop. Shine the spotlight on those people who can manipulate’.”

Barnier said a 30 billion euro emergency financing package put in place for Greece, which would be funded primarily by other countries in the euro zone, would calm nervous markets.

“I think that the European authorities have responded well and that the mechanism of responsibility and solidarity that was put in place is correct,” he said. “The markets have welcomed it as a credible tool.”

In tackling derivatives — financial instruments whose value is linked to the price of an asset such as a currency or bond — Barnier signaled his openness to exempting companies that use them to guard against currency fluctuations, for example.

“I will not do anything on derivative products which would endanger the real economy and industry.”

Barnier also signaled his opposition to high banker pay.

“I want to warn that none of the players in the financial services industry should have a short memory and that our role is to prevent that people have a short memory.”

“Certain systems of remuneration, such as certain bonuses, do not make any sense at all and do not have any justification in my view.”

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(Editing by Timothy Heritage)

Investment banks to bear brunt of levy: EU’s Barnier