Germany drafts tax to pay for future bank crises: source

25th August 2010, Comments 0 comments

The German government adopted Wednesday a disputed draft tax on bank profits intending to act as a buffer against the cost of future banking failures, a government source said.

German banks would have to set aside part of their profits to feed a fund that would deal with the potential collapse of a financial institution deemed to be of strategic importance.

The proposed legislation is expected to be approved by lawmakers by the end of the year and would tax banks based on their size and level of risk taken by their managers.

Germany is the first country to move towards implementing such a bank tax, and was pushed to act after bailing out the property-lender Hypo Real Estate at a cost of more than 100 billion euros (127 billion dollars) in guarantees.

Berlin wants other countries to follow its lead so German banks are not put at a disadvantage to foreign competitors, but to date only France has expressed enthusiasm for a similar tax.

© 2010 AFP

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