French President Nicolas Sarkozy and German Chancellor Angela Merkel have joined forces in seeking consensus on a bank tax levy, at the G-20 summit scheduled in Toronto this Saturday.
In a joint letter addressed to the summit host, Canadian Prime Minister Stephen Harper, Sarkozy and Merkel argued taxing bank on financial transactions was necessary to ensure “a fair contribution” from them towards sharing any burdens associated with government interventions in the future financial crisis.
While acknowledging the G-20 nations’ efforts towards implementing financial reforms in the backdrop of global financial crisis, they said recent financial troubles had indicated more action was needed to ensure financial stability.
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“We must keep up the momentum in implementing our agenda and continue to address the new challenges in a coordinated manner”, they said in the letter, copies of which were sent to 17 members of the G-20 including Prime Minister Manmohan Singh, who will attend the summit.
President Sarkozy and Chancellor Merkel called for strengthening bank capital and liquidity to make the financial system better prepared to withstand shocks.
They suggested results of on-going stress tests on banks to assess their financial health must be published to ensure full transparency. “In Europe, this will be done at the latest in the second half of July”, they said.
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The two leaders stressed on more stringent supervision of the use of derivatives and coordinated measures to address challenges posed by speculative trade involving credit default swaps (CDS) and those including sovereign bonds.
They also sought tightening supervision and regulatory framework of credit rating agencies to improve their rating process.