AIB AND Bank of Ireland, along with the other Irish banks, face the prospect of paying large, upfront levies into a fund to insure against any future financial collapse under proposals from the EU Commission.
Internal markets commissioner Michel Barnier wants all financial institutions in the EU to make annual contributions to national funds which would support the sector at times of weakness.
Mr Barnier’s plan, to be unveiled later this week, is in line with proposals from the International Monetary Fund (IMF), which wants to impose a global levy on institutions to protect against a repeat of the 2008 meltdown.
The scheme, which would raise billions of euro every year, has already raised opposition from bank interests.
The European Banking Federation, an umbrella body to which the Irish banking industry is affiliated, says new taxation mechanisms would duplicate other regulatory changes without enhancing the stability of the financial system.
Such a system would curtail lending capacity because it would reduce bank capital levels, it has argued.
Government sources said last night that they could not comment on proposals which had not yet been published but pointed out that an existing levy on the six institutions whose liabilities are guaranteed by the State set a precedent.
“The Government is already charging the banks for the benefit of the State guarantee, which will bring in approximately €1 billion over two years for the taxpayer,” said a well-placed source.
Mr Barnier, who has advanced a sweeping reform agenda since taking office in February, said last week that he favours a tax on banks’ balance sheets.
He has argued against a tax on bank transactions but has suggested the new fund would fulfil a function akin to that of emergency planning for natural disasters.
However, Mr Barnier is likely to leave open the question of whether the tax should be imposed on assets, liabilities or profits when making public his proposals.
Revenue from any charge should go into funds to help with the “orderly unwinding” of cross-border banks in crisis, he has said.
Draft plans from the commission examined as a “realistic option” the possibility of establishing a network where national systems operate within a common European framework with some of the proceeds going towards a resolution fund rather than all to national coffers.
The EU executive wants to see legislation in place by 2011. The proposal would have to be approved by EU governments and by the European Parliament.
France, Germany and Britain have called for the imposition of a new bank tax that would reflect the risks posed by different financial institutions.
While Germany wants the levy to go into a special bailout fund, France and Britain have argued that the cash should go into general national coffers.
The commission is not at this point expected to set out the scale of the funds that should be raised in the new scheme.
The proposal is likely to be discussed by EU and other global leaders when G20 heads of state and government gather for a summit next month in Toronto.
The plans come as EU member states debate proposals to tighten their fiscal discipline in an effort to avoid a repeat of Greece’s debt crisis.
The euro fell again yesterday after the Spanish central bank took over a small regional savings bank, adding to worries about economic growth in the euro zone.
Analysts said that the weekend seizure of CajaSur underscored weakness in the European banking sector, fanning worries that other savings banks could require money at a time when Spain is trying to cut public spending.