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British banks should shoulder the cost of bail-outs

As Smart Taxes has been advocating for some time that normal tax payers should not bear the burden of a financial collapse which was not their responsibility and it seems this view is gaining more and more international support. It was reported in today’s Daily Telegraph that Paul Tucker, deputy Governor of the Bank of England, raised the idea that in the future the Government should be able to “claim back the eventual cost” of a capital injection into stricken banks after the financial crisis is finished.

He said governments should consider forcing banks to set up “insurance” schemes to cover the cost of possible future bail-outs.  “If the authorities determined that a public equity injection was necessary in order to preserve stability, government could be authorised to provide the support, but with a right to claim back the eventual cost, if any, from an increased ‘insurance’ levy on the banking system over a period of years beginning after the crisis had clearly passed. Under that kind of regime, more of the cost of banking system failures could fall on the shareholders of banks generally rather than on the public purse.”

While Smart Taxes does not agree that an insurance scheme is the answer to this problem, preferring to know the extent of the liability upfront. We hope the floodgates continue to remain open as more and more commentators and decision makers subscribe to the view that those responsible for the crisis should be made to pay.

Read the article in full here.

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