G20 fails to endorse bank tax

Finance ministers and central bank chiefs from the Group of 20 nations failed to agree on the idea of a global bank tax in Washington Friday.

The tax had been put forward by the International Monetary Fund as a measure to protect against financial sector meltdowns like the one that occurred in fall 2008.

In a communiqué issued at the end of their session, the countries pledged to come up with ways to ensure that banks make a "fair and substantial contribution towards paying for any burdens associated with government interventions to repair the banking system."

The statement also said the countries were working to come up with a co-ordinated effort to overhaul financial regulatory systems, which were found to be seriously flawed.

The goal now is to present a plan to the G-20 leaders when they meet in late June in Toronto.

The communiqué also said the global economy is recovering at a better-than-expected rate because of the massive amounts of government stimulus that have been provided. 

No direct mention of Greece

The six-page communiqué made no direct mention of Greece's debt troubles, which overshadowed the gathering.

On Friday, Greece, hobbled by high borrowing costs, triggered an emergency aid plan to draw cash from the IMF and countries that use the euro — the first test of whether the EU is prepared to bail out one of its members.

The G20 also called for countries to provide more public detail on how they will collectively withdraw some $5 trillion US in stimulus spending and raise interest rates to more normal levels.

"We emphasized the necessity to pursue well co-ordinated economic policies that are consistent with sound public finances; price stability; stable, efficient and resilient financial systems; employment creation; and poverty reduction," the communiqué said.

The IMF proposed to tax borrowing by banks and other financial institutions and impose levies on profits and pay to dissuade compensation schemes that might give senior management an incentive to engage in risky commercial behaviour. 

The revenue from the taxes would be used to create a bailout fund to be used in the event of a financial crisis.

Finance Minister Jim Flaherty of Canada opposed the tax, while Britain, France and Germany supported the idea as a way to raise funds for future bank bailouts.

The United States favoured a modified proposal under which banks would be taxed to recover the cost of a financial bailout after the fact.

Bank of Canada governor Mark Carney also opposed the idea of a bank tax, saying it was a "distraction" from what should be the core agenda of financial reform: the improvement of bank balance sheets and regulation of the financial sector.