The world's top nations will back general principles rather than a specific tax to make banks pay for their own bailouts in future, finance ministers and diplomats said today.
The Group of 20 has pledged a string of reforms to financial regulation to avert a rerun of the worst financial crisis since the 1930s that forced governments to use trillions of dollars of taxpayer cash to shore up banks.
G20 finance ministers and central bankers meet in South Korean port city of Busan tomorrow and Saturday to find consensus for their leaders to endorse at a summit in Canada later this month.
Some officials are already playing down the chances of a uniform tax on banks, raising doubts about the G20's ability to agree on tricky issues.
"I don't think we're on the verge of a global consensus on bank levy yet," US treasury secretary Timothy Geithner told reporters in Seoul.
There was support in Europe and the United States for a levy "but there's not universal support for that across the G20, at least at this stage. And I don't think that's going to change in Korea," Geithner said.
The International Monetary Fund proposed two bank taxes in April but G20 asked it to refine its ideas after opposition from some countries, such as Canada.
Canadian Finance Minister Jim Flaherty said in Beijing today that G20 nations needed to "keep our eye on the ball" in reforming the financial sector, focus on capital requirements and steer clear of a global bank levy.
Canada and Brazil say their banks needed no bailouts during the financial crisis triggered by a meltdown in US subprime mortgage market in August 2007, so there was no need for a levy either.
Japan believes its national deposit insurance scheme is an alternative to a bank tax. Canada is seeking support for using contingent capital at banks to protect taxpayers from bailouts.
A G20 source said the meeting will ask the Financial Stability Board (FSB), tasked by the group to implement its reform pledges, to consider additional measures to improve transparency in the $615 trillion off-exchange derivatives sector, hedge funds and credit rating agencies.
The FSB, made up of G20 regulators, central bankers and treasury officials, may come up with some proposals in time for the Toronto summit, the source added.
The Busan meeting will also urge speedy agreement on new rules to beef up bank capital, the source said.
Diplomats said ministers will also try to thrash out an agreement ahead of the Toronto summit on how to tackle "too big to fail" banks.
Policymakers want to make it easy and quick to wind up an ailing bank so that it does not destabilise the broader financial system as seen with the crash of Lehman Brothers in 2008.
But as with the levy, the G20 is expected to end up endorsing general principles rather than a uniform set of remedies.
Reuters