Bank taxes must not “eat up” capital, says EBRD

Levies on the financial sector are warranted in some cases but joint, coordinated action is preferable and taxation should not "eat up" banks' capital, the European Bank for Reconstruction and Development said on Friday.
Bank President Thomas Mirow also told a conference in Vienna that emerging Europe needs to adopt a more balanced growth model and there was an urgent need to address the issue of foreign currency lending to unhedged borrowers across the region.
"Bank levies are a prominent example where joint action would be more effective and thus preferable," Mirow said, adding: "There are circumstances when such levies are warranted."
"Taxing should not eat up capital when the global regulatory objective is to increase capital to strengthen financial sector stability. Reducing capital also diminishes banks' lending capacity when the recovery needs new credit," he added.
Mirow also said that the recent Basel III measures do leave room for additional regional-level steps, including some restrictions or additional taxation.
"Under such circumstances the coordination of regional or national measures becomes even more important in order to ensure that these measures are not circumvented and that the banking industry finds a level playing field," he told the conference.