The International Monetary Fund (IMF) came out with a forceful statement of their intent to curb the activities of the banks with proposals to tax their profits and pay. The IMF proposed a twin approach with a financial stability contribution (FSC) which would require all financial institutions to contribute to a fund that could be used to support weak firms. This might start out as a flat rate tax but later it could be determined by the bank's size and level of risk. The second measure is a financial activities tax (FAT) which would tax the banks according to their profits and the pay structure they employ. This measure had not been anticipated either by Wall Street or the City. The banking lobby will no doubt start to fight back aggressively to try and prevent either of the new measures being taken up. The future could be a tougher time for the banks including the likes of Goldman Sachs who revealed their pay and bonus pool had been set at $5.5bn for the 1st quarter of 2010.
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Kevin Boakes
- About Kevin Boakes:
- I used to work in the City but gave it up in the late 1980s when we had our first child. The hours were not too compatible with a good family life! Since then I have taught Finance and Financial Markets at Kingston University. In addition I have acted as a consultant to a number of Investment Banks. My great working passion is trying to explain complex financial market terms as simply as possible. I also like to make it interesting by relating it to the real World. I wrote the book with the aim of showing lots of other people that Finance can be interesting and accessible. I hope you like it!
1 comment:
One of the implications if proposed taxes are levied could be that the financial institutions would spread these costs to the customers by making the products more expensive. The issue of moral hazard could be another issue since banks could engage in more risky activities in order to achieve more returns, now they will be certain that they would be bailed out from this tax fund set aside.
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