Canada Strongly Promotes Tight Regulation Instead of Global Bank Tax
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Cabinet ministers from Canada’s Conservative government fanned out across the world recently to lobby against proposals for a global tax to cover the cost of bank bailouts.
Since 2008, the Conservative government in Canada has championed tight regulation, a position it had not previously embraced.
As a result, Canada’s banks were largely unaffected by the banking crisis of 2008,
and the Canadian government argues that any tax would unfairly penalize them.
Cabinet ministers from Canada’s Conservative government fanned out across the world recently to lobby against proposals for a global tax to cover the cost of bank bailouts.
Since 2008, the Conservative government in Canada has championed tight regulation, a position it had not previously embraced.
As a result, Canada’s banks were largely unaffected by the banking crisis of 2008,
and the Canadian government argues that any tax would unfairly penalize them.
In its view, their comparatively strict regulatory structure played the key role in protecting Canada’s banking system
from the disasters that hit the US, UK, Iceland, and most of the rest of the Western world,
although some economists argue the country’s banking oligopoly and its conservative bank managers may have been equally important factors.
A plan for a global bank tax is being championed by both the Obama administration and the International Monetary Fund, according to this article in the New York Times.
But at a meeting of the Group of 20 finance ministers and central bank governors last month, Canada led the opposition to the plan.
The move by Canada, which will be the host of the Group of 20 heads of state meeting in Toronto next month, appeared to be an attempt to create an alliance against the tax.
Senior Canadian cabinet ministers spoke out against the plan during speeches in Washington, Shanghai and Mumbai as well as at a news conference in Ottawa.
“We’re not against international cooperation,” Tony Clement, the industry minister, said in an interview. “We’re against this particular bank tax because it creates moral hazard.”
In place of a tax, Canada is proposing that banks be required to hold a special kind of debt that could be readily transformed into equity when reserve funds run low.
