BERLIN (Reuters) - Germany’s plans to introduce a levy on bank assets to fund future bailouts will raise about 1 billion euros ($1.4 billion) per year, coalition sources told Reuters on Monday.
However, analysts doubted the fund would be big enough to stabilize the banking sector in a future crisis.
“Even after 20 or 30 years, the fund would be far from a size sufficient to prevent a future crisis,” Merck Finck analyst Konrad Becker said, noting the rescue of Germany’s second biggest lender, Commerzbank (CBKG.DE), cost nearly 20 billion euros.
A spokesman for the Finance Ministry earlier said the cabinet was working on details of the levy, which is seen helping tackle the “too big to fail” problem of big banks assuming taxpayers will ride to their rescue.
The German coalition’s move raises the chances of the G20 agreeing on levies at a summit in June, and marks the final nail in the coffin for a Tobin tax on financial transactions which has been rejected by the United States and Canada.
A senior ally of Chancellor Angela Merkel said the German levy would be tailored to hit mainly big banks whose failure would destabilize the broader financial system.
“It will be heftier for banks with a high systemic risk ... than for cooperative and savings banks,” said Volker Kauder, parliamentary floor leader for Merkel’s conservatives.
A spokesman for the Finance Ministry said the cabinet was working on details and aimed to agree key points for a bank charge at a cabinet meeting on March 31.
Talk of the tax has unleashed squabbling among players in the financial sector about who should pay most into the fund.
Coalition sources said the country’s insurers would be exempted under the plans, while commercial banking association BdB said all players, including insurers, smaller banks and hedge funds, would benefit from it and should pay their share.
German savings banks worried that they might have to pay too much, given their systemic risk was “practically nil.”
An internal Finance Ministry document obtained by Reuters on Friday suggested Germany could reap as much as 9 billion euros annually if it followed the model proposed by the United States.
But even this charge would need to run for years to raise the vast sums needed for bank bailouts.
A levy planned in Sweden on its much smaller banking sector aims to raise $10.6 billion for a future financial crisis fund.
The Stoxx 600 Europe index of banking shares fell 0.6 percent on Monday .SX7P recovering earlier losses. Deutsche Bank (DBKGn.DE) fell 0.2 percent, while Commerzbank was 0.5 percent lower.
Finance Minister Wolfgang Schaeuble said the charge would be a “kind of insurance” but should not affect banks’ performance.
“It is about learning from the past crisis,” Schaeuble said.
The financial crisis forced German taxpayers to rescue stock-market listed lenders IKB IKBG.DE and Hypo Real Estate, which was nationalized, with billions of euros in capital and guarantees. Berlin also took a 25 percent stake in Commerzbank, bolstering its capital as part of an 18 billion euro rescue.
The G20 has asked the International Monetary Fund to propose next month ways to recoup bank bailout costs. Its managing director, Dominique Strauss-Kahn, said last week a transaction tax was unworkable but that he would propose a tax of some sort.
Coordinated action by G20 countries would be compatible with Germany’s concept for a bank charge, government spokesman Ulrich Wilhelm said on Monday.
“We always supported international coordination,” Wilhelm said. “Such a coordinated action, which is an important aim for us, is also possible with this model.”
There is still some debate over whether such a levy should pay for future bailouts as well — a step some policymakers say could encourage banks to continue with risky behavior as they know a fund is at hand to rescue them.
Deutsche Bank, which got through the crisis without a government bailout, has backed the idea of a fund but said the government would have to contribute alongside banks.
“We need a mixed financing solution to achieve the needed size. Therefore the state has to participate at least at the beginning,” Deutsche Bank CEO Josef Ackermann said in a speech last week.
Schaeuble said Germany would have liked to consider introducing a tax on financial transactions, but this was only possible if it was implemented on a global scale.
“And at the moment, there is no realistic chance for this,” he said.
Reporting by Brian Rohan, Matthias Sobolewski, Gernot Heller and Rene Wagner in Berlin and Jonathan Gould and Philipp Halstrick in Frankfurt, writing by Sarah Marsh and Huw Jones; Editing by Stephen Nisbet/Susan Fenton