UPDATE 2-France may increase existing bank tax to help local governments
* Tax would to be based on regulated capital-source
* New tax would hit banks' ability to finance economy-FBF (Adds comment from source, recasts)
By Matthias Blamont
PARIS, Sept 17 (Reuters) - France may increase an existing tax on banks to bolster lending to towns and cities, a source close to talks on the matter said on Tuesday.
The French government has been looking for ways to fill a financing void left by the collapse of Franco-Belgian bank Dexia , which once dominated lending to municipalities and local government entities.
Dozens of towns and cities across France are fighting Dexia over an estimated 11 billion euros ($14.7 billion) in risky structured loans that went sour after the financial crisis, saddling them with double-digit repayment rates and in some cases pushing mayors to go on debtors' strikes.
The French government said in June that it would set up a special fund to help such local authorities and said at the time the fund would be partly funded by the banking sector but gave no further details.
"We're not talking about a new tax but a rise in the ... tax, which depends on the amount of regulated capital," the source said, speaking on condition of anonymity and referring to an article by newsletter Agefi which had talked about a new tax.
The source said the government would increase an existing tax aimed at penalising bank risk - expected to raise 800 million euros this year - to help back the fund.
A spokeswoman for the French banking federation said that the idea of some form of tax to back the proposed fund had already been mentioned by Finance Minister Pierre Moscovici in June. She reiterated the federation's opposition to the idea, saying there was already a process in place to resolve conflicts over the controversial loans.
"Taxes on the banks have already strongly increased in the last two years," she said. "As you know, any additional tax on the banks is a blow for their capacity to finance the economy."
Agefi had said the additional funds from the tax would amount to 50 million euros a year, making it relatively mild compared with some other levies the banks pay.
The French Finance Ministry did not have any immediate comment. ($1 = 0.7489 euros) (Reporting by Christian Plumb, Jean-Baptiste Vey, Lionel Laurent and Alexandre Boksenbaum-Granier; Editing by Sophie Walker and Jane Merriman)
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